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Ryanair cautious over volcanic disruptions

The latest issue to appear on European airlines’ radar is Iceland’s Met office’s increase in its volcano alert status; to orange, the top-but-one warning level.

Ryanair plane
Source: Bloomberg

The timing of volcanic disturbances is a particularly tricky thing to call, but considering the last major volcanic activity in Iceland forced the closure of many European airpaths for six days, affecting over 10 million passengers, this cautious attitude is understandable.

The airline sector has had its fair share of problems over the last twelve months, as a number of European carriers have issued profits warnings and downgraded their outlooks. Hedging against the volatility of the oil market is always the most important but challenging area for airlines to manage. The destabilisation of Iraq has seen worries increase over the country’s ability to meet its supply commitments. Iraq is once again the second largest contributor to the OPEC nations. These worries have partially been balanced by the increased production from Saudi Arabia, but the net effect has ultimately been that the oil price is now sitting at 13 month lows.

Ryanair, to its credit, has managed to avoid these problems, even though it has gone through many structural changes this year. The airline has seen an increase in passenger numbers in July up 4%, while at the same time it has also seen an increase in load factors, up by 3%. This has seen Michael O’Leary’s airline enjoy a record 83 million passengers on an annual rolling basis. Considering the awful figures that have been seen by a number of European competitors, the Irish airline’s efforts to rebrand itself as a friendly flexible airline appear to be working. 

However, athough clients are now beginning to view Ryanair as a friendlier and more flexible discount airline, shares in the company have still struggled in the last six months as sentiment waits to catch up.

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