Airlines

soddy1979

If you were to pick one as an investment from Ryanair, Aer Lingus & Easyjet who would you choose?

I'm leaning towards Easyjet. I've been looking at the three companies and I think Easyjet look the best - generating positive income. They do have negative cash flow for FY2008 (although this was mainly due to their acquisition of GB airways). They are also trading at a discount to their book value.

I don't like Aer Lingus, their costs seem high. Ryanairs operating margin is ok, but was obviously negatively impacted by their position in Aer Lingus for 2008. I'm still wary of this position.

I'd love to hear your opinions!

woodseb

soddy1979 wrote: »

I'd love to hear your opinions!

the quickest way to become a millionaire is to invest in airlines - that's assuming you start off as a billionaire though;)

soddy1979

woodseb wrote: »

the quickest way to become a millionaire is to invest in airlines - that's assuming you start off as a billionaire though;)

OK, and your reason for thinking they're not a great investment is?

woodseb

soddy1979 wrote: »

OK, and your reason for thinking they're not a great investment is?

it is an extremely difficult business to make money in due to the higher fixed and variable costs inherent in the business, while there is also intense competition driving down margins even further....there are obviously success stories such as if you've invested in ryanair or southwest at the right time, but it is one of the few sectors that has regular bankruptcies and failures. I'm just puzzled why somebody would pick that sector as one to invest in, risks don't complement the return in my opinion.

Raskolnikov

I would be very fearful of Aer Lingus. For one, they still operate a defined benefit pension scheme for most of their employees. Secondly, their costs are ridiculous compared to almost every other airline. Finally, management have a habit of decieving shareholders.

soddy1979

woodseb wrote: »

it is an extremely difficult business to make money in due to the higher fixed and variable costs inherent in the business, while there is also intense competition driving down margins even further....there are obviously success stories such as if you've invested in ryanair or southwest at the right time, but it is one of the few sectors that has regular bankruptcies and failures. I'm just puzzled why somebody would pick that sector as one to invest in, risks don't complement the return in my opinion.

Thanks Woodseb. I agree with most that you have stated above, but I also think that with multiple failures, lower margins, etc., creates opportunities for a minority of companies to create value for shareholders. Based on their business models, I would think that these would be Ryanair and Easyjet in Europe, and based on a very brief look at their statements, I think Easyjet would be the best value here.

By no means am I saying the airline sector is the sector people should be investing in. I'm just looking at the three companies I've noted above to see which one I think looks undervalued.

soddy1979

Raskolnikov wrote: »

I would be very fearful of Aer Lingus. For one, they still operate a defined benefit pension scheme for most of their employees. Secondly, their costs are ridiculous compared to almost every other airline. Finally, management have a habit of decieving shareholders.

On that, there was a good article in Monday's FT about how British Airways calculate their requirements to their defined benefit pension scheme.

You can see it here.

http://www.ft.com/cms/s/0/a36c457e-5e7f-11de-91ad-00144feabdc0.html

ixus

I think your analysis needs to be more rigid if you are thinking of investing in any airline. It would be advisable to get as much information as possible on the airline/travel/oil sectors and perhaps look at how regions like the EU/US are looking to implement any new regulations and how this would affect a company.

Oil is a big factor obviously. Historically, how has each airline managed price spikes? Are some airlines better than others at managing this risk?

Additional revenue other than flight sales. Who returns more?

What airline has greater flexibility in terms of terminals, target market etc?
Say for example, Ryanairs main market is in the UK, what is the trend in travel to/from the UK or from the particular terminals?

Just a few questions off the top of my head worth analysing.

British Airways business traffic falls sharply

British Airways’ premium passenger traffic fell sharply in May, as lucrative business travellers continue to desert in large numbers from the UK flag carrier as well as from many of the world’s other leading long-haul carriers.

TTNYWWBM

Not an area I like to invest in personally, but I say the following...

- The Ryanair stock performance is extraordinary, almost dare I say it iron clad knickers!
Look at the attached graph for 1 year even in Mar 09 it only dipped to 2.75
Even the swine flu had virtually zero effect! It seems a nice conservative few points earner if you buy in as low as you can and sell high. But remember they are making their bucks on the charges and crap sold on planes like scratchcards etc, and all the ancillary stuff. F all for the ticket but 45 euro in baggage overweight penalties for example.

- Aer Lingus... Also historically a very flabby badly run company, even poor performance back when it was crazy money for tickets, knocked a little bit into shape by Ryanairs influential holding, but still I am unimpressed! Compared with the colossal balance sheet of Ryanair ohh errr...

Cityjet I have to look into...

Comordha

I'm glad to see this thread as Ryanair is a stock I've always had an interest in. I'm also considering adding a little bit of this sector into my portfolio. Many years ago when I first wanted to start investing I tried to buy this stock, would have made a very nice profit but couldn't get approval from the brokers. Anyway, enough nostalgia for now. This share really has hit a brick wall though in terms of increasing in value. Granted it has held up very well through the turbulent months / years gone since this crisis all began but I just can't see where it is going. The share price now reflects exactly the point at which the airline is at. Whatever happened to that transatlantic talk and why don't they enter more markets - North Africa & Eastern Europe (proper). These are the initiatives I would be looking for. Not issues relating to extra / hidden charges. It's very hard to decide on this one for now, especially since there is no hope in ever receiving a dividend.

rugbyman

i am a regular flier with Ryanair. I have bought and sold their shares twice ,with a gain in each case. Millions of their shares were offloading by the main owners at up to six euro, and more last week at the current price. from the regular travellers viewpoint i can see the low cost model in action and it is good,

Since there has never been a dividend, one can only hope for a s.p. rise and i dont see that happening.

because of their efficiency, because of immediate steps being taken to stem futher losses,by parking up planes etc and cutting flights, they are strong. Others will fail over the next years and Ryanair can up their prices a bit and gain extra profits.

two points of note to travellers, ryanair seem to be in an all out war on AerLingus, Even now the fares quoted on similiar routes are way below the Aer Lingus fares. i propose to fly tomorow and the tickets are still relatively cheap and i bet the plane will be 80 % full.

Another point , i was waiting to board an AerLingus flight ex paris and from where i stood I watched FIVE cleaners walking off the plane. The ryanair crew clean their own. All these things add up,big time.

Strangely enough ,a punt on AER LINGUS might be more profitable in the coming year, on the basis that they,A.L., MUST do something to stop the rot.

regards Rugbyman

rugbyman

two points of note to travellers, ryanair seem to be in an all out war on AerLingus, Even now the fares quoted on similiar routes are way below the Aer Lingus fares. I propose to fly tomorow and the tickets are still relatively cheap and i bet the plane will be 80 % full.


yes its a a strategy i reckon, booked a return ticket last night at 6 pm, still 20 euro (actual cost sub 50 euro) and the plane was 80 % full. Some time ago the ryanair strategy was to increase to the max by that time

rugbyman