High Fuel Costs Hit Ryanair (RYAAY), Air-Travel Demand Aids

Ryanair Holdings RYAAY is being hurt by high fuel costs. The airline’s fuel and oil expenses increased by more than 500% year over year in first-quarter fiscal 2023. Apart from higher fuel prices, a ramp-up in RYAAY’s operations is pushing up total costs. Total operating expenses rose more than 100% year over year in first-quarter fiscal 2023, with a substantial increase in airport and handling charges, among other costs.

Labor-related woes are also hurting operations at Ryanair, currently carrying a Zacks Rank #4 (Sell). Lower average fares also represent a headwind. During the first quarter of fiscal 2023, average fares declined 4% year over year due to coronavirus-led woes and the Russian invasion of Ukraine.

However, a rebound in air-travel demand following the easing of COVID-related restrictions is a huge boon for Ryanair. In first-quarter fiscal 2023 (ended Jun 30, 2022), the number of passengers who flew on RYAAY planes were 45.5 million, up 461% year over year. Air traffic in the quarter was 9% more than the pre-COVID levels. Load factor (% of seats filled by passengers) was 92% compared with 73% a year ago.

Continuing the trend, the number of passengers ferried on RYAAY flights in August registered a record figure. In September too, passenger volume was a robust 15.9 million compared with 10.6 million a year ago. The traffic volume was 13% above the September 2019 figure (pre-coronavirus era).

Load factor (% of seats filled by passengers) was 94% in September 2022 compared with 81% a year ago. Ryanair aims to increase its traffic in fiscal 2023 to 165 million, indicating 11% growth from the pre-COVID traffic numbers.

Stocks to Consider

Some better-ranked stocks in the Zacks Transportation  sector are Air Lease Holdings AL and Forward Air Corporation FWRD.

Steady growth in fleet is driving Air Lease’s top line. Strong freight and cargo markets as well as improving air-travel demand bode well for AL. AL’s efforts to reward its shareholders are encouraging.

The Zacks Consensus Estimate for Air Lease’s 2022 earnings has been revised 9.9% upward in the past 60 days. AL’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 29.1%. FWRD currently carries a Zacks Rank #2 (Buy).

Higher volumes owing to a better freight market environment bolster Forward Air’s top line. Thanks to its operational growth, FWRD is committed to rewarding its shareholders with dividends and share buybacks. In February, FWRD’s board approved a 14% hike in its quarterly dividend payment, taking the total to 24 cents per share.

The Zacks Consensus Estimate for Forward Air’s 2022 earnings has been revised 3% upward in the past 60 days. FWRD’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 5.6%. FWRD currently carries a Zacks Rank of 2.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Ryanair Holdings PLC (RYAAY) : Free Stock Analysis Report
 
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