Air Traffic

Image source: Freepik - ikaika

What's going on?

Ryanair reported weaker-than-expected quarterly results on Monday, but investors have spotted just how many planes the budget airline’s putting into the sky.

What does this mean?

It’s true that investors had higher hopes for Ryanair, even though it posted its first quarterly profit since the start of the pandemic. But the company told them to keep their eyes trained squarely on the future. See, Europe’s biggest discount carrier has spent the pandemic using a substantial cash pile to increase the number of routes and flights it offers, and it’s got big plans to cut fares this winter to nab would-be passengers from its competitors too. In fact, the company’s expecting the number of passengers to overtake pre-pandemic levels as soon as next spring. Investors didn’t need telling twice: they shrugged off Ryanair’s initially disappointing results and sent its stock up.

Why should I care?

The bigger picture: What energy costs?

This winter could be tough on Europe’s airlines, with a new Covid wave at risk of hampering customer demand and a rising oil price pushing up fuel costs. But at least Ryanair’s got the latter covered: it’s locked in the cost for 80% of all its fuel needs until next summer. That should help insulate the carrier even if energy prices keep rising, and protect its profits going into next year.

Zooming out: It always comes back to inflation. 

It’s not just fuel costs that are rising: businesses are seeing costs rise for everything from raw materials to labor. And unlucky for you, data out on Monday showed that a record 45% of UK companies are expecting to pass those costs onto customers through price hikes. That’ll only add to inflation worries, and put more pressure on the Bank of England to raise interest rates – which should discourage additional spending – when it meets later this week.

Originally posted as part of the Finimize daily email.

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