Ryanair just told the market two things at once. The first is that it had a very good year.
The second is that some of its rivals probably will not be around in twelve months. Both came out of the same call.
CFO Neil Sorahan said Monday the airline has "armageddon" plans in a drawer for the jet fuel crisis. He is not planning to use them.
Sorahan also said weaker carriers could "go to the wall" by winter. The stock rose 5.6% on the day.
The Hedge That Saved The Year
Profit after tax climbed 40% to nearly 2.3 billion euros, or about $2.7 billion for the year ending March. Passenger numbers ticked up 4% to 208.4 million.
Revenue rose 11% to 15.54 billion euros, but profit grew almost four times faster. Margins did the heavy lifting.
The reason is the hedge. The airline locked in 80% of its summer fuel at $668 a metric ton before the Middle East war reset oil prices higher.
The unhedged 20% has spiked, while the hedged 80% carries the year.
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The Spirit Airlines Comparison
Sorahan pointed straight at Spirit Airlines. The U.S. budget carrier fell apart after the fuel crisis stacked on top of its debt load.
He said Europe is staring at a version of the same setup. CEO Michael O'Leary said in April that if jet fuel stays at $150 a barrel through July, August and September, "European airlines fail."
That is not subtle. Ryanair is openly saying some of its rivals will not make it.
The firm is built to scoop up the routes when they don't. The CFO added that Europe's exposure to the Strait of Hormuz is dropping, as suppliers turn to the U.S., Venezuela and Brazil for crude.
Prices, he said, will stay higher for longer. That is exactly the setup Ryanair has hedged for.
What To Watch
Summer fares were first expected to tick up. The airline now thinks they will be broadly flat, partly because customers are booking closer to departure than usual.
Citi flagged the trend in a note Monday. Less booking visibility makes it harder to call the second half.
The next clue is what happens to fares in the fall. If they stay flat, Ryanair grinds.
If they rise because a few rivals disappear, the firm runs the table.
For now, Ryanair is one of the only carriers in Europe with the balance sheet, the hedge book and the route map to ride out a long stretch of high oil. The rest of the field has a long winter to plan for.
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