It’s been a tough time for airlines over the past few years.
A not-so-friendly pandemic grounded planes for the best part of two years, halting near-constant growth in passenger numbers over the two decades prior, as Zoom quizzes replaced holidays and emails replaced business meetings. Hello bailouts, restructures and, for airline investors, nasty share price declines.
Then, as the world emerged from COVID-19 in 2022, people started boarding planes again. Which was good. Although airports and airlines were overwhelmed, with half of flights in Europe delayed last summer and nearly 2,000 flights cancelled every day. Not good.
And now, strikes and cancellations are rearing their head again, with last week’s Easter break providing a real challenge.
Ryanair (LON:RYA), the Irish low-cost carrier, is Europe’s biggest airline by passenger numbers (it carried 120 million passengers in 2021). With a strong balance sheet and prudent planning, it was able to avoid a bailout during the pandemic. But how has its share price performed for investors?
Ryanair share price is below pre-pandemic levels
First things first. Ryanair’s share price is currently €14.10, recovering nicely from the pandemic low just north of €8.
But it is still not above the pre-pandemic level of €16 of February 2020, investors nursing a loss over the last three years (it is up 6.4% from January 2020, if you prefer that as the start date of the pandemic).
In fact, despite Ryanair’s strong performance and growth up the airline ranks (it rose from eighth to fifth in 2021 by passenger numbers), it has been, well, a pretty terrible investment.
In fact, its share price is currently trading at the same level it was in September 2015, over seven years ago. In the same time frame, if investors just bought the S&P 500, they would be up 108%.
Airline industry has struggled
Perhaps it is unfair to single out Ryanair for poor performance. Because in assessing the airline industry as a whole, returns have been anaemic for investors.
I will use the JETS ETF as a proxy here, which is an airline ETF comprised of airline operators from across the world (Ryanair is contained in the index, currently constituting a 1.1% stake).
The JETS ETF has actually fared far worse than Ryanair in recent years. Taking January 2020 as a pre-pandemic benchmark, the ETF is down a crushing 41.6%. Again, over the same time frame, Ryanair has returned a modest 6.4% gain.
This provides perspective when assessing the performance of Ryanair. With this context, the airline has done OK, yet is mired in an industry which has struggled as a whole.
Strengthening this line of thinking is those bailouts mentioned earlier. Many airlines were bailed out by taxpayer money (the US alone bailed out airlines to the tune of $54 billion). But not Ryanair. This is impressive, but also – in the strictest capitalist view – unjust. Ryanair’s competitors struggled mightily and were bailed out, yet Ryanair’s prudent management meant they got nothing. I’m not saying this is right or wrong, but that is what happened.
While Ryanair’s share price obviously fared better as a result of avoiding financial chaos, it is tempting to wonder where it would be had struggling competitors been allowed to go under, and what their long-term position would look like.
And so, while a 0% return on one’s money over five years is not exactly enjoyable, it is better than other airlines. Ryanair investors can take solace that they at least backed the right horse – the real mistake was going to the horse races at all, when almost anything else would have paid more.
The below chart demonstrates this visually, showing the S&P 500 since pre-pandemic (the performance gap is even greater going further back).
Ryanair remains correlated to industry
The quandary is one central to investing as a whole. When you purchase a stock, you are not merely betting on the company – you are betting on the industry.
If you look at the above chart again, you will see that the price action of the Ryanair share price is tightly correlated to JETS, i..e the airline industry. But the scale of the declines have not been as sharp, while the strength of the upticks have been greater.
From an investor’s point of view, you can’t ask for much more.
Another way of presenting this is to isolate the correlation measure itself – the below (taken on a rolling 60-day window) shows that while it oscillates, the correlation has resided mainly above 0.8 since the start of 2020, bar some brief forays below. That is an incredibly tight correlation, yet not unexpected.
So while Ryanair has been bad, it could have been worse. The below shows the individual share price performance over the last 5 years of the top publicly traded airlines (ranking them by passengers flown in 2021, excluding Turkish Airlines which has surged recently amid a quickly-devaluating Turkish lira).
It shows how torrid the climate has been and how tough an environment Ryanair has been operating in. For reference, the S&P 500 is up 54.7% in the same time frame.
And so, Ryanair investors will lick their wounds, but other airline investors are worse off. It is yet another reminder of how damn difficult it is to beat the stock market when you bet on individual stocks or sectors.
Sometimes it pays to be boring.
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