Ryanair - 7
Keeping Danny in Sandwiches
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As I have previously highlighted, the profit at Ryanair is derived from sale and lease back of aircraft and the sale of aircraft that are still fairly new.
The company has 51 aircraft on lease yet looking through the IAA register
Irish Aviation Authority - Latest Published Register all Ryanair aircraft whether owned or leased are 737 8AS
Having been shafted by Ryanair before I cannot see Airbus getting involved in a bidding war with Boeing knowing full well that they are being used simply to bring the Boeing price down.
Ryanair has always been a leasing company that runs an airline. It has to turn aircraft round to make a profit.
The company has 51 aircraft on lease yet looking through the IAA register
Irish Aviation Authority - Latest Published Register all Ryanair aircraft whether owned or leased are 737 8AS
Having been shafted by Ryanair before I cannot see Airbus getting involved in a bidding war with Boeing knowing full well that they are being used simply to bring the Boeing price down.
Ryanair has always been a leasing company that runs an airline. It has to turn aircraft round to make a profit.
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If this year FR makes around 200m euro profit on 67m pax then it works out the full year profit of 3 euro per pax. The results for the summer show them making about 10.6 euros per pax. In the winter they will lose around 3-5 euros per pax on average.
They have a fuel bill for this summer of 12.65 euros per pax when they got jet fuel at 613 euros/tonne in Q1 and 630e/t in Q2. For the summer of 2010 the 50% they hedged is at 663e/t and 741e/t for q1 & q2 (strangely they call that year fy 2011 as it ends march 2011). There is a very strong case that profit next year will only be 1-2 euros per pax and that will be their last year of profit.
Their inablity to sell aircraft at book value will mean they need to carry a too large a fleet in 2010 & 2011 or need to sell them at a significant loss.
Over the next few days the so called experts will do the maths and project profits for the next 3 years. Profitablity will be very dependant on the oilprice they model but the market for 2nd hand planes could be just as important. You cannot just put 500 million euors of aircraft on ebay and expect a good price.
They have a fuel bill for this summer of 12.65 euros per pax when they got jet fuel at 613 euros/tonne in Q1 and 630e/t in Q2. For the summer of 2010 the 50% they hedged is at 663e/t and 741e/t for q1 & q2 (strangely they call that year fy 2011 as it ends march 2011). There is a very strong case that profit next year will only be 1-2 euros per pax and that will be their last year of profit.
Their inablity to sell aircraft at book value will mean they need to carry a too large a fleet in 2010 & 2011 or need to sell them at a significant loss.
Over the next few days the so called experts will do the maths and project profits for the next 3 years. Profitablity will be very dependant on the oilprice they model but the market for 2nd hand planes could be just as important. You cannot just put 500 million euors of aircraft on ebay and expect a good price.
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Ryanair will continue to thrive as long as there are monkey's willing to work for nothing.
Now with decent employers making people redundant, things must look even more rosey at the bottom of the airline industry.
Now with decent employers making people redundant, things must look even more rosey at the bottom of the airline industry.
Anyway, nice to see someone is making money.
Over the next few days the so called experts will do the maths and project profits for the next 3 years. Profitablity will be very dependant on the oilprice they model but the market for 2nd hand planes could be just as important. You cannot just put 500 million euors of aircraft on ebay and expect a good price.
Market for 2nd hand aircraft is pretty much irrelevant if they decide not to place an order with Boeing and sweat the asset for 10 years. Average age of aircraft is less than 3 years.
Seemingly if Ryanair says something negative about the future you believe every word but if its positive regarding profit or passengers its questionable.
Recessions don't last for ever as is now been proven and for the oft repeated mantra that people will fly with other than Ryanair when things are better I wonder who is the other than Ryanair as a lot fewer about and it will get less.
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from todays report
Doing the maths shows they need to find profitable use for 90 more aircraft and someone to buy 20. If they need to grow more slowly more than 20 will need to be sold. If they cannot find a market for the planes they then need to find something to do with an extra 110 planes and pay the staff to operate them, airports to park them and lease compaies to pay for some of them.
It will take years for things to finally go wrong but the aircraft on order will cost billions of Euros and need to pay their way. With a glut of old aircraft around new airlines will could start any upturn come unless there is a sharp rise in fuel costs. Either way ryanair is about to stall.
7.Capital commitments
At September 30, 2009 Ryanair had an operating fleet of 202 (2008: 168) Boeing 737-800 aircraft. It also had firm orders for an additional 110 Boeing 737-800’s. The delivery of these firm order aircraft will increase the fleet size (net of planned disposals) to 292 aircraft by March 31, 2012.
At September 30, 2009 Ryanair had an operating fleet of 202 (2008: 168) Boeing 737-800 aircraft. It also had firm orders for an additional 110 Boeing 737-800’s. The delivery of these firm order aircraft will increase the fleet size (net of planned disposals) to 292 aircraft by March 31, 2012.
It will take years for things to finally go wrong but the aircraft on order will cost billions of Euros and need to pay their way. With a glut of old aircraft around new airlines will could start any upturn come unless there is a sharp rise in fuel costs. Either way ryanair is about to stall.
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Befree,
Swiss cheese logic I'm afraid. Full of holes.
Pay the staff to operate your "extra" 110 planes. Do you believe that FR currently has the staff to operate an extra 110 planes? One of the leanest airlines in the industry currently has the manpower to operate 110 planes on top of it's current fleet???
Is FR compelled by some unknown force of the universe to hire these people whether they need them or not??
As for your profit based on selling planes theory, well have you considered that FR currently expend their profits on expansion? They have the option to move their business model from expansion based to purely profit based. FR bought the aircraft at a reduced price in the first place. If they decide to keep them for their design life and keep them flying and generating revenue rather than selling them on after 3-5 years do you think they wont make money from them? What hope then is there for any airline buying aircraft at today's maket prices?
FR simply took advantage of a perculiarity in the market place when they found that second hand 737's were selling on the open market for more than they paid for theirs new and that by exercising their options with Boeing and replacing disposed of aircraft with a brand new one they could still make a profit.
A brilliant business decision and one FR was aware from the beginning would not always be the case.
Swiss cheese logic I'm afraid. Full of holes.
Pay the staff to operate your "extra" 110 planes. Do you believe that FR currently has the staff to operate an extra 110 planes? One of the leanest airlines in the industry currently has the manpower to operate 110 planes on top of it's current fleet???
Is FR compelled by some unknown force of the universe to hire these people whether they need them or not??
As for your profit based on selling planes theory, well have you considered that FR currently expend their profits on expansion? They have the option to move their business model from expansion based to purely profit based. FR bought the aircraft at a reduced price in the first place. If they decide to keep them for their design life and keep them flying and generating revenue rather than selling them on after 3-5 years do you think they wont make money from them? What hope then is there for any airline buying aircraft at today's maket prices?
FR simply took advantage of a perculiarity in the market place when they found that second hand 737's were selling on the open market for more than they paid for theirs new and that by exercising their options with Boeing and replacing disposed of aircraft with a brand new one they could still make a profit.
A brilliant business decision and one FR was aware from the beginning would not always be the case.
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Befree
Whilst your analysis might seem logical from your own perspective,
you are forgetting one very important thing.
Ryanair management have consistently shown themselves to be
adept at steering their business model.
One line of your initial post with Ryanairs statement that you have failed to highlight is ' Ryanair will end its relationship with Boeing and confirm a series of order deferrals and cancellations' - is this not significant to your 'selling aircraft for profit' forecasts......???
MM
Whilst your analysis might seem logical from your own perspective,
you are forgetting one very important thing.
Ryanair management have consistently shown themselves to be
adept at steering their business model.
One line of your initial post with Ryanairs statement that you have failed to highlight is ' Ryanair will end its relationship with Boeing and confirm a series of order deferrals and cancellations' - is this not significant to your 'selling aircraft for profit' forecasts......???
MM
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You may not like what I say but it is based on the information released by Ryanair. The 110 planes on order are firm orders - Ryanair can only get out of this order if Boeing lets them.
Ryanair do not have the staff to operate the extra planes but they will be needed when the planes come. That could mean an extra 45% staffing cost. For just this summer the operating cost of Ryanair were 1.3 billion euros. The operating revenue was 1.766 billion euros. In the winter the income will be around 200 million euros less than revenue giving something like 200 million profit for 2009/10.
The extra planes must cost something like 2 billion euros. The extra operating cost around a billion euros a year (but note that the Depreciation and aircraft rental charges in the opex means the planes are charged for as an operating expense over time). The extra planes need to generatre an extra net billion pounds of income.
Ryanair do not have the staff to operate the extra planes but they will be needed when the planes come. That could mean an extra 45% staffing cost. For just this summer the operating cost of Ryanair were 1.3 billion euros. The operating revenue was 1.766 billion euros. In the winter the income will be around 200 million euros less than revenue giving something like 200 million profit for 2009/10.
The extra planes must cost something like 2 billion euros. The extra operating cost around a billion euros a year (but note that the Depreciation and aircraft rental charges in the opex means the planes are charged for as an operating expense over time). The extra planes need to generatre an extra net billion pounds of income.
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befree
My point was that if Ryanair says in the statement that YOU
quoted - order deferrals and cancellations -that means to me that
they have a contract clause that enables them to do so.
As I stated before - you are not dealing with business novices
here - give them some credit (ha ha). Why would you want them
to fail?
MM
My point was that if Ryanair says in the statement that YOU
quoted - order deferrals and cancellations -that means to me that
they have a contract clause that enables them to do so.
As I stated before - you are not dealing with business novices
here - give them some credit (ha ha). Why would you want them
to fail?
MM
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Unless someone knows the clauses in the contract and can publically quote from them this is all random speculation and in danger of turning into a willy waving contest ( again ).
There are two vocal camps :
1) I love Ryanair as they make my local airport seem busy
2) I hate Ryanair for more reasons than I care to mention but mainly because of a bad experience that left me burned.
None of these two camps is party to what is going on in Dublin HQ so can we leave the egos out of it and stick to what's known? It will be interesting to see where all these new planes go but the truth is prices won't be heading up any time soon.
There are two vocal camps :
1) I love Ryanair as they make my local airport seem busy
2) I hate Ryanair for more reasons than I care to mention but mainly because of a bad experience that left me burned.
None of these two camps is party to what is going on in Dublin HQ so can we leave the egos out of it and stick to what's known? It will be interesting to see where all these new planes go but the truth is prices won't be heading up any time soon.
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Skipness - contracts between parties can be secret if both
parties want it - and who contributing on here would have
any idea as to the facts?
I dont think its unreasonable to question someone
about the statement THEY quote.The 'devil is in the
detail' as they say!
MM
parties want it - and who contributing on here would have
any idea as to the facts?
I dont think its unreasonable to question someone
about the statement THEY quote.The 'devil is in the
detail' as they say!
MM
Last edited by mickyman; 2nd Nov 2009 at 17:03.
None of these two camps is party to what is going on in Dublin HQ so can we leave the egos out of it and stick to what's known? It will be interesting to see where all these new planes go but the truth is prices won't be heading up any time soon.
Think the Euro - Dollar rate pretty much shows where the order will be as highlighted earlier in the thread as it has swung so much as to make buying in $$$ attractive when majority of revenues are in €€.
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the list price of a 737-800 is $72million for a basic plane. even if MOL got them at half price, the 110 planes are going to be about 3-4 billion euros depending on what exchange rates the deal was done.
I think it is a valid question to ask how MOL can possibly use the extra planes without dropping fares even more. Boeing are not just going to let a 3-4 billion contract to get dropped or delayed without a big refund. MOL was getting the planes so cheap due to the size of the order.
I think it is a valid question to ask how MOL can possibly use the extra planes without dropping fares even more. Boeing are not just going to let a 3-4 billion contract to get dropped or delayed without a big refund. MOL was getting the planes so cheap due to the size of the order.
the list price of a 737-800 is $72million for a basic plane. even if MOL got them at half price, the 110 planes are going to be about 3-4 billion euros depending on what exchange rates the deal was done.
Lets see 110 planes at even a 50% discount is €24 M a plane and current price is not price agreed 3 years ago.
What does exchange rate have to do with Boeing ? It sells in Dollars.
Think rereading your old forecast posts on FR is good entertainment.
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Befree, I think the main point you seem to be missing from your H1 presentation analysis is that Ryanair aren't saying they are worried about the 110 737-800s they have on order - it's getting their hands on more of them at similar prices that's the issue!
Befree, I think the main point you seem to be missing from your H1 presentation analysis is that Ryanair aren't saying they are worried about the 110 737-800s they have on order - it's getting their hands on more of them at similar prices that's the issue!
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Befree, I think the main point you seem to be missing from your H1 presentation analysis is that Ryanair aren't saying they are worried about the 110 737-800s they have on order - it's getting their hands on more of them at similar prices that's the issue!
I think the problem for FR is being able to sell planes at a rate and price that matches what they are listed for on the accounts.
I think some shareholders will be worried about a few billion pounds of kit coming in without the profitable routes to use them on.
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Ryanair has confirmed that it plans to build a base in Bratislava with three aircraft and 20 new routes but that the plan will be completed only if the Bratislava Airport reduces airport fees by at least 70 percent, daily SME reported.
“70-percent is acceptable, however, 100-percent is ideal,” said Henrike Schmidt, Ryanair's marketing manager for Slovakia. Ryanair will not go further in negotiations below 70 percent, she added.
“If the airport accepts the maximum requirements of Ryanair, its revenue will not increase since Ryanair requires a drastic reduction of fees. Therefore we will consider the conditions carefully,” said Dana Madunická, spokeswoman of M.R. Štefánik Airport in Bratislava.
The Slovak Ministry of Transport, which holds a 48-percent stake in the airport, considers such conduct unfair.
“The airport deserves money for its services. The fees should at least cover the costs,” said Stanislav Jurikovič, spokesman of transport ministry.
“70-percent is acceptable, however, 100-percent is ideal,” said Henrike Schmidt, Ryanair's marketing manager for Slovakia. Ryanair will not go further in negotiations below 70 percent, she added.
“If the airport accepts the maximum requirements of Ryanair, its revenue will not increase since Ryanair requires a drastic reduction of fees. Therefore we will consider the conditions carefully,” said Dana Madunická, spokeswoman of M.R. Štefánik Airport in Bratislava.
The Slovak Ministry of Transport, which holds a 48-percent stake in the airport, considers such conduct unfair.
“The airport deserves money for its services. The fees should at least cover the costs,” said Stanislav Jurikovič, spokesman of transport ministry.