Ryanair shares make sharp descent

The slump in Ryanair’s share price following airline’s last profit warning was shrugged off by some analysts as the usual ‘under-promise and over-deliver’ tactic.

This misplaced certainty was the reason we saw a semblance of a recovery from the €5.80 lows back in early September.

The eurozone recession has been given a lot of the blame for the decline in Ryanair’s annual profit. Yet when we compare the share price action to that of rival easyJet over the past few months, it becomes clear that something else is amiss.

The concept of low-cost flights which was created by Ryanair has to a degree been cannibalised by other airlines, and that has made competition in this space fiercer than ever. When you have the likes of Aer Lingus and easyJet all vying for the same business, it’s not difficult to see where the profit is flowing. Both competitors have fallen in sympathy in early trade today, but now look to be seeing a mild recovery as bargain-hunters step in.  The same cannot be said for Ryanair shares just yet.

CEO Michael O’Leary has made mild attempts to reinvent Ryanair’s image and reputation lately, for example by going onto Twitter and answering a variety of questions posed by customers. The main take-away from the entire incident is that customer service, or the lack thereof, is the main problem, and that passengers given a choice will not necessarily choose Ryanair straight off the bat, as a result.

Down over 28% since early July, the share price is coming under intense pressure today. It is down 12% as I write, trading at nine-month lows.

Regaining lost customers is often a difficult task, and this uphill battle the airline will face is likely to be reflected in the share price in the near term. Any move below €5.33 will likely target the €5.00 mark.

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