ryanair bigger than lufthansa

[ILUV2FLY]

heard on bbc this a.m. that ryanair is no bigger than lufthansa,
and easy is now bigger than b.a.
now lets hear from all the experts on pprune, or at least those
not choking on their cornflakes or on reality.
also hear that southwest is worth more than AA,united,Con&delta
combined? is this possible? Mighty round of humble pie methinks.

oops! ryanair now (delete no) bigger than LH. sorry finished late.

[invinoveritas]

Market capitalisation is sometimes an ephemeral view of a company's worth, particularly during a speculative "bubble" such as the one that the low-cost's are seeing now. whilst BA et al have crushing debt piles, thus reducing their "worth" do you really think that ryanair/easyjet are actually "bigger companies" than BA/Lufthansa? Just look at all the assets etc. And potentially the worth of slots and so on.
Additionally in the near (or perhaps middle) future the costs of the low-cost airlines will increase when the pilot shortage starts to bite, and their guys say "no, i don't want to be hosed down with more cash please, i would like an extra day off, or an improved pension", or whatever it may be- and slowly their costs start to rise, ticket prices slowly slide up as full service airlines (which have admittedly been slow to catch on) lower their ticket prices, and hey-presto, things will come full circle.

[CHK Y'R 6]

British Airways' shares fell to their lowest point in the flag carrier's history yesterday, valuing the airline at less than EasyJet, as the prospect of Middle East war meant the aviation industry faced a renewed crisis.
As the stock market took another plunge, traders marked BA shares down 8.75p to 95.75p, below their previous nadir, reached during the Gulf war in early 1991.

EasyJet, flies to just over 30 destinations with 3,000 staff and 62 planes, overtook BA with a value of £1.039bn.

Industry experts said BA's difficulties were little different from those of national airlines across Europe; Air France's shares fell by 13.5% yesterday, Lufthansa was down 8% and KLM dropped 6%.

Source:
Av News (http://luchtvaart.pagina.nl)

[Lefthanddown]

I must say this has surprised me somewhat as I have been flying an awful lot recently and BA's planes look bloody full to me and mostly with Business passangers.
It will be interesting to see the figures when they get reported.

[Oscar Duece]

Was that an ACTUAL traded share price, or just an analysts target....

[Cayambe]

Actual prices. As I write this the BA market capitalization is £1.11bn and Easyjet is £1.06bn because BA has outperformed EZJ by 3% today.

[citrus200]

Oh no its all doom and gloom!!1:( Rubbish!

Have you seen the market valuations of some of the american carriers - look into it and you may find that you may be able to pick up a new B777 for the price of a certain major carrier!

Its turbulent times - agreed! however BAs cash reserves are substantial - if things kick off in the gulf. other airlines may well file for bankrupcy as there reserves are not as large as BAs!

Easyjet may be valued higher than BA - however Ryanair has been for some time - what does it mean? well not a great deal in my opinion - all airlines are suffering however the low cost operators are doing well - the aviation industry traditionally goes through peaks and troughs - as long as we ride out the troubled waters and make serious efforts to change the service offered to the pax, good times will come!

[Max Angle]

Buy NOW. I am going to phone my broker.

[FlapsOne]

That's funny Max,

That was said when they were £1.26, and again when they were £1.43 , and again................

[Unwell_Raptor]

This does not mean a thing. Share prices are a combination of greed, fear, hunch, black magic, and hype. There are plenty of companies now in that great Stock Exchange in the sky that were once worth more than BA or Barclays or Tesco, or whoever.

Profits are good. Growth is good. Cashflow is good. But only once a company has kept it up for a few decades is it really good. The best companies have strength in depth. The markets are easily dazzled by the latest glittering newcomer, but they usually get out even faster than they came in.

I am not knocking Easy; they have created a new market and good luck to them. But when BA hurts enough it will come back and bite - the power of the brand is still awesome despitye the worst that Ayling could do.

PS Before you ask, I do not work for BA!

[FlyingIrishman]

Market capitalisation is one of several ways to measure the size of an airline. As rightly said, it does not describe actual size in terms of fleet size, assets, slots, etc.

I'm not conviced about Invinoveritas' theory though. Undoubtedly costs will rise but it is then up to the airline to cut other costs to make things balance. Ryanair is the undisputed leader in this field with the lowest operating costs and lowest ticket prices, therefore in the best position to keep offering fares at the level they're at now.

Other low cost airlines will find the going tougher as it will be felt more when costs increase. It will be interesting to see how many casualties there will be in the low fares sector and who will still be going in 5-10 years from now. My money is on Ryanair and the easyJet group.

[Young Paul]

At the end of the day,

1) Does the company you are looking at provide more closely what you want? Do you want a cheap holiday to somewhere in Europe, or do you want to buy a ticket between one arbitrary point in the world and another, using the resources of an international alliance?

2) Does the product that the company is selling meet the needs of more people than the product that the other company is selling?

3) Is it doing that at a price which provides a sensible return to investors?

4) Is its financial strategies such that it will continue to be able to do that and provide a good return for the investors?

These are much more fundamental questions than the share price. Market capitalisation is a statistical freak. Ryanair and Easyjet won't allow you to get to Los Angeles, let alone Timbuktu. Of course, that doesn't mean that LH or BA are actually stronger than Easy or Ryan.

[MarkD]

Market cap is not reliable when not backed by a reasonable amount of profit. The dotcoms failed because they were never going to make enough profit to make a return on investment, and management refused to damp down expectations because they were all holding options.

FR has a high mkt cap but also makes a lot of money.

[Ben Evans]

Don't us the 'our assets are worth much more than the market cap, don't worry about it'.

Let's look at the facts.

-6 billion debt + no growth prospect for 2-3 years

Maybe -300 mil (2002), -150 mil (2003), break even at best (2004)

The value of BA's assets is (5 billion), but in the current market (3 billion) with property and aircraft values headed South.

This gives a bottom line of (Minus 6 billion, Minus 300M, Minus 150M) + 5B = Minus 1.45 billion. At best not allowing that their notional assets are actually 3Billion and not 5Billion in the present market.

The company's worthless, and is only surviving upon its reputation and long.... LONG term prospects. Who would buy a stock that won't pay a dividend, nor in a company that won't make money for 3 years?

It's a bit of a gamble, and this is reflected in the short term rises and falls in the share price.

Ben

[Unwell_Raptor]

Aviation is a very strange industry. BA operates over 300 aircraft, but have rarely made enough profit in a year to buy even two new 744s for cash!

[Young Paul]

Okay then, so Ryanair is "making money". However, it's already been pointed out on pprune that, rather than amortizing maintenance costs over the life of aircraft, they will pay them as they arise. This is an entirely legitimate accounting practice, and is fine at the moment, operating new aircraft. However, what about when the 150 new aircraft each need a C or D check within two or three years of each other? Is the low cost market genuinely able to bear the number of carriers there are now, or are all going to have to scale back their ambitions? If the growth potential is there (a moot point), then how do the low cost carriers expect to be able to crew it, since they are not currently investing in training new pilots (to the best of my knowledge) and demographics ensures that the number of available pilots is limited. What about when people realise that "low cost" refers to how the operation is run, not the price of a ticket? It is already possible to get cheaper tickets on many routes from "full-fare" airlines (try for example LH from LON-MUN rather than FR from LON to Salzburg). Have the low cost airlines hedged themselves sufficiently against fuel price rises?

In short, is the share price a genuine reflection of their ability to return a profit? Or is it just that low cost carriers are flavour of the month, the latest dot coms? Only time will tell.

I'm not justifying BA or LH - to be quite honest, I'm amazed that anybody should invest in airlines, the margins are fundamentally so small. I'm just saying that market capitalisation means nothing - as, in fact, most of these responses do.