Ryanair in Crisis - Will O'Leary be ousted?
 

Is it possible that I'm the only one absolutely gleeful at O'Leary's pain?

First the obstreperous tike FAILS to protect the company by ignoring world consensus on rising oil prices. FAILING to hedge any of its huge fuel bill.

Then just as the market peaks, he DISASTROUSLY hedges 85% of Ryanairs bill in the mid $120's. What an narcissistic DOLT.

With world opinion now settling for a price of around $100 per barrel it must surely be time to call for O'Leary's resignation from the board. He's rich, he wont care (really), but the world is a different place. No longer are we in boom times, no longer can this contemptuous, blustering, academic drop out ride the wave of cheap money.

Ryanair will survive but it's over Mike, be a good boy and fall on your sword....

most positively not a subject of News, but of (spreading) Rumours....

I guess you have a beef with him?

Redline, that's some chip you have on your shoulder. Probably bigger than MOL's bank balance.

Redline...... Ahaaaa i get it!

You re a News of the World reporter and are flying this subject to see if you can get new headliner for Sunday!

Perhaps you can do a pre emptive story about "reporter infiltrating the security of the 2012 Olympics"!

Crisis? What crisis? :{:{:{

Whether you like the chap or not, you have to admire what he has achieved with a business.

i respect\Micheal O'Leary for what he has achieved and created with Ryanair - but I have to slightly agree with Redline on the points regarding hedging the fuel. Rather strange a) not to hedge, and then b) to panick hedge at $120 per barrel!

I heard about the hedging at +120, is this fact? where did the info come from?

Ryanair in Crisis-Will MOL be ousted!
 

Redline.

In answer to your question about MOL being ousted. Obviously pure speculation on your part, obviously you have a chip on your shoulder, sorry make that a bloody great log, there is about as much chance of MOL being ousted as a Farmer in Alabama trying to pack butter up a Polecats ass with a red hot poker. Have a nice day and go speculate on the stockmarket.:D

As far as the airline industry in Europe is concerned..."You ain't seen nothing yet!".

Like him or loath him I predict that MOL's best time is yet to come, quite soon.

Is hedging at 120 really so bad?
 

If indeed Ryan Air has hedged at $120 it is not such a stupid proposition as you have made out.

With the current weather patterns around the american oil fields production has been shut down which may lead to a temporary spike in the price of oil due to under production - as the weather patterns may be temporary or further storms may occur. The longer the production is shut down to be made safe the longer and higher probabilty of a spike there will be.

But we cannot say its stupid as when you buy on a futures market you are buying an item to be delivered in the future at an agreed price - so what the price is now is of little consequence, its the expected factors around the time of delivery that affect the price of oil then. Whilst market analysts say that around $100 is the correct price for oil there may be factors MOL's financial advisors are taking into consideration that could appear around the time the Oil is due to be delivered.

So what we can say is that it is not so stupid for Ryan Air to do this as what it allows is for financial planning and budgeting, Ryan Air at least knows now what cost bases it has to cover during that period of delivery and these will not change regardless of the price of oil at that time.

We also have to remember with a futures market, Ryan Air will not just go in and say I want to buy at the price of $120, it will be buying at the current market rate for the period in question - which if thats the current rate then the analysts expect that to be about the right price for the oil when it is to be delivered.

In a futures market the prices may be dictated by speculation and how many people are buying and selling, if more people are buying the speculation is that the price is good and the market will rise. If more people are selling then the price could go down.

Whilst Ryan Air have bought at $120 today, they may sell it at $130 tomorrow and make a tidy profit. This principle is how risk markets work, the risk is you can make money or lose money. Ryan Air would not enter into a risk market blindly without financial advice on expected outcomes. Typically a specialist brokerage firm will be used that will manage the risk on their behalf.


So whilst I have no personal oppinion of MOL - I dont see why he should "fall on his sword" when it actually appears quite a shrewd move to protect the business of Ryan air.

p.s. I am plain ole SLF - a programmer by trade who has worked on software for trading markets.

FR hedged for September @ $129. For October thru December @ $124.

Most oil hedging contracts are also in the form of options, ie. they give you the right to buy not the obligation to buy. If oil falls below the contract price, you can let the option fall away unused and buy at the market price on the day. Of course, you have to pay a price (like a premium) for writing the option in the first place, but it's not an unreasonable price to pay - risk versus reward.

Fuel Policy ?????? This can't be right
 

http://extras.timesonline.co.uk/ryanair .pdf:=

here's the link again
 

What currency did MOL use to hedge fuel. IE if he had a load of £ to by $ with at the time, he is on a winner, even at $120 a barrel because of the exchange rates

Right! That's the decision made then. In future I'll be flying Aer Lingus to Dublin & Cork in future & BMI, LS, EZY & FlyBe everywhere else then.

O'Lordy! O'Leary!
:ok:

for the assistance of SLF, could we have an technical analysis of the memo linked above and its errors explained?

We have no way of knowing what the contract says, but if it was an option then MOL might have called it an option not a hedge because all hedging is not as an option. Obviously the cheapest insurance would be in the form of a guaranteed delivery not an option. Do you think MOL would got for the cheapest insurance?

The typical premium paid for oil hedging options is 10% up front. If Ryanair have contracted to $129 a barrel for September they paid $12.90 a barrel when they did the contract and will pay the remaining $116.10 should they take fuel at this price. If they later want to buy on the spot market it has to be less than this. Furthermore Ryanair are obviously not buying barrels of Brent crude, but Jet A-1, and there is a difference in pricing between the two which fluctuates.