Turbulent morning for low cost airlines

Both Ryanair and easyJet took a hit on Monday morning despite the two airlines reporting what seemed to be positive news.

Both Ryanair and easyJet took a hit on Monday morning despite the two airlines reporting what seemed to be positive news.

The Irish low-cost airline fell 2.1% despite boosting its full-year revenue forecast after third-quarter results came in better than expected.

Ryanair - which is now calling itself an 'ultra-low cost' carrier - said an 8.0% rise in average fares, stronger pre-Christmas bookings, and lower than expected operating costs meant profits were better than forecast.

However it added that fourth quarter passenger numbers were expected to be around 3% fewer than the previous year.

This was due to it grounding up to 80 aircraft to limit the impact of high oil prices, airport fees at Stansted and Dublin, and weaker demand, it said.

"Shares are trading at highs not seen since 2007 and traders now seem to be contemplating how much further this company can go," said Rik Thakrar, Risk Manager and Senior Dealer at Spread Co.

"[Our] clients have been consolidating positions, closing longs and taking profits this morning, a sign that the shares may have gone as far as they can for now," he said.

It was a similar story for easyJet's stock, which was down 2.4% in morning trading.

The airline announced that its Chairman, Sir Mike Rake, is to step down from the board this summer.

In a press release that confirmed earlier weekend reports, easyJet said that Rake has agreed to stay in his post until a successor is found to ensure a smooth hand over. The board has already started looking for a new Chairman.

The move comes after three years of high-profile public arguments between management and easyJet founder Sir Stelios Haji-Ioannou about how the company is run.

These battles culminated last week in Stelios threatening to sell part of his stake if the board goes ahead with plans to buy new aircraft.

Stelios, who had previously attempted to oust Rake as Chairman and failed, voiced his concern over the company's expansion plans in an open letter published on January 21st, accusing directors of "squandering" cash on new planes.

Unsurprisingly, the company made no mention of this confrontation on Monday.

However, investors did make their feelings known by selling shares.

Matt Basi, Senior Sales Trader at CMC Markets UK said Rake had endured a strained relationship with majority shareholder Stelios over his growing role in operations at Barclays.

"With the majority of shareholders said to have supported Rake, the stock trades lower on news of his departure," he said.

Recommended

Persimmon yields 12.3%, but can you trust the company to deliver?
Share tips

Persimmon yields 12.3%, but can you trust the company to deliver?

With a dividend yield of 12.3%, Persimmon looks like a highly attractive prospect for income investors. But that sort of yield can also indicate compa…
1 Jul 2022
Don’t try to time the bottom – start buying good companies now
Investment strategy

Don’t try to time the bottom – start buying good companies now

Markets are having a rough time, so you may be tempted to wait to try to call the bottom and pick up some bargains. But that would be a mistake, says …
1 Jul 2022
Share tips of the week – 1 July
Share tips

Share tips of the week – 1 July

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
1 Jul 2022
Bunzl: boring is good for business
Share tips

Bunzl: boring is good for business

Food-service distribution company Bunzl is not a terribly exciting business, but it looks cheap and could be a great investment, says Rupert Hargreave…
30 Jun 2022

Most Popular

Five dividend stocks to beat inflation
Share tips

Five dividend stocks to beat inflation

During periods of high inflation, dividend stocks tend to do better than the wider market. Here, Rupert Hargreaves pick five dividend stocks for incom…
30 Jun 2022
Don’t try to time the bottom – start buying good companies now
Investment strategy

Don’t try to time the bottom – start buying good companies now

Markets are having a rough time, so you may be tempted to wait to try to call the bottom and pick up some bargains. But that would be a mistake, says …
1 Jul 2022
UK house prices are definitely cooling off – but are they heading for a fall?
House prices

UK house prices are definitely cooling off – but are they heading for a fall?

UK house prices hit a fresh high in June, but as interest rates start to rise, the market is cooling John Stepek assesses just how much of an effect h…
30 Jun 2022