Ryanair share price faces turbulence as airline earnings start

The Ryanair (NASDAQ: RYAAY) share price retreated by more than 2.45% on Thursday as worries of the airline industry continued. The stock tumbled to a low of  $94.54 in New York after Delta published financial results that missed estimates. It has dropped by more than 16.2% from the highest point this year and is now at the lowest point since May.

There are signs that the aviation industry is slowing after having a strong start to the year.  A few months ago, American Airlines caught investors by surprise after it slashed its forward guidance.

Delta Airlines confirmed this after it published relatively weaker financial results. As we wrote here, Delta’s revenue rose by 13% YoY to $14.6 billion. Its domestic passenger revenue rose by 6% while business travel continued to recover. Its total profit rose by 60% YoY.

However, the company slashed its free cash flow (FCF) estimates and its Q3 guidance amid ‘short-term pressure’. The biggest pressure facing airlines like Delta, Ryanair, and IAG is that jet fuel prices have jumped in the past few months.

This happened as crude oil prices jumped by more than 30% from the lowest level in June. As I wrote earlier this week, jet oil price has continued its bullish momentum and the situation could worsen in the coming months. Analysts at JPMorgan believe that the oil will surge to $150.

The implications for all this is that Ryanair will likely downgrade its guidance when it publishes its results on November 11th. The most recent results showed that the company’s revenue increased by 40% to €3.65 billion as traffic jumped to over 50 million passengers. 

Ryanair’s costs jumped by 23% because of the rising fuel prices. Therefore, these costs likely jumped more in the last quarter as jet oil fuel prices soared.

Still, it is worth noting that Ryanair and Delta are much different companies. Ryanair is a low-cost airline that focuses primarily on the European market while Delta is a domestic and international airline.

A key reason why Ryanair is a good long-term investment is its hedging policy and strong balance sheet. It has over 4.8 billion euros in gross cash. It has hedged its fuel requirements by about 85%.

The daily chart shows that the Ryanair stock price has been under intense pressure in the past few months. It has formed a descending channel shown in black. Along the way, the stock has plunged below the 50-day moving average and the 23.6% Fibonacci Retracement level.

The current price is slightly below the important resistance point at $98.23, the highest swing on March 6th. Therefore, the stock will likely continue falling in the near term as costs worries continue. More downside will be confirmed if it moves below the lower side of the descending channel.

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