Passengers and oil fuel Ryanair rise

Ryanair shares surged past the €10 mark early yesterday following news that the airline carried 6.02 million passengers in December, 20 per cent more than the same month in 2013.

The figures also show that Ryanair is within hailing distance of carrying 90 million travellers in its current financial year, which ends on March 31st. Rolling annual traffic up to the end of December was 86.4 million, indicating that in 2014 as a whole, passenger numbers rose 6 per cent.

Ryanair filled almost nine out of every 10 seats on its aircraft last month. If the trend continues, it looks likely to deliver on the €750 million to €770 million profit that it guided when it published November traffic figures.

Investors appear to think this will happen. Its shares were up more than 3 per cent at €10.13 at lunchtime yesterday, before sliding back and closing 0.93 per cent ahead at €9.91.

This continued a trend that has seen Ryanair’s stock gaining close to 35 per cent over the last quarter of 2014. The more or less constant stream of good news from the airline has obviously been a factor in this, but is it worth asking if something else is at work?

Falling oil prices could be playing their part. This is always good news for airlines, but Ryanair should benefit most as, excluding fuel, it has the lowest unit costs of its peers at about €29 a seat. Lower fuel costs give it even more scope to compete, sell seats and win market share.

In November, the company said it had extended its fuel price hedges to 90 per cent for its 2016 financial year at $93 a barrel. It predicted that this would cut its fuel bills by 2 per cent over the next 12 months. It also pledged to look for further opportunities to extend its hedging programme into 2017. If they have arisen, it will also have almost certainly locked in further savings over the longer term, helping to boost its figures.

At the same time, it makes sense for those investors who are selling down their positions in oil companies to put their money into sectors, such as aviation, that stand to benefit from the commodity’s falling price.