That’s not its official name but it’s what Ryanair – Europe’s Favourite Airline colourful CEO, Michael O’Leary, calls the plane because it holds 4% more passengers, burns 16% less fuel, and reduces noise emissions by up to 40%
A few EU Commissioners must be hoping the “noise emission reduction” rubs off on the outspoken CEO, but I doubt it
He was once asked, “Do you carry rich people on your flights?
“Yes, I flew on one this morning and I’m very rich.”
Not everyone is a fan, but I think he’s a brilliant CEO
Because few industries are tougher than airlines and yet Ryanair’s 10yr average Return on Equity has been 17%
Supermarket giant, Tesco, has only averaged 4%, & they benefited from COVID!
Ryanair has generated a net €5bn of free cash flow over the past 15 years notwithstanding the Global Financial Crisis, the European Crisis, Covid, and the Ukraine war.
He goes against the crowd at the right time thereby securing great prices
“I buy everything low-cost. I buy cheap shirts. I buy cheap shoes. It’s a philosophy. I’m just cheap.”
After 9/11 when airlines were canceling orders, Ryanair ordered 100 Boeing 737s with options for 50 more
He bought when others sold = great prices.
That was to expand their fleet to carrying 40m passengers annually
They’re targetting 165m passengers in 2023
When Covid led to a cancellation of plane orders, Ryanair pounced and ordered 75 “game changers”
To use at landing slots that he secured from bankrupt competitors
And when many airlines fired staff to survive COVID, Ryanair negotiated hard, securing pay cuts to minimize job losses
So when other airlines were canceling flights in the summer because they were struggling to re-hire former staff they’d cast aside during the pandemic, Ryanair was sitting pretty with loyal staff.
Guess who gained market share?
And when the oil price was low, Ryanair hedged 80% of their consumption through to March 2023 in the $60s.
Most competitors didn’t
The result of all of these smart & contrarian decisions is that net debt has fallen since pre-covid to only €426m and shares in issue have only increased 4%
In contrast, British Airways owner, IAG has seen net debt soar by €4bn to €11.7bn & shares in issue have increased 66%
All just to stay afloat
Is Mr. O’Leary worried about the recession?
No, he sees the opportunity in every crisis – “We think it will be good for Ryanair’s growth because in a recession people just become more price sensitive. Ryanair has the lowest fares, and growing market share.”
So, are you going to be like Mr O’Leary & buy “cheap” in order to secure great returns on your equity?
Because right now valuations outside the US are low
Of course not everyone has the mental strength necessary to swim against the crowd
But if you can, it can be a “gamechanger”