The airline sector, due to its cyclical nature, is particularly sensitive to shifts in investor risk appetite. In a risk-off environment, shaped by geopolitical tensions, economic slowdown, or higher oil prices, airline stocks typically face selling pressure, with capital flowing instead into safe-haven assets such as Treasuries, the Swiss franc, or gold.
Although Ryanair [ISE:RYA] benefits from its competitive low-cost model and leadership position in Spain, it remains exposed to macroeconomic volatility and potential demand drops in risk-off scenarios. This duality makes the company an attractive play during risk-on phases but vulnerable during periods of global uncertainty.
Ryanair has done well for shareholders in the last six months, up 19%, plus shares are up 25% on a YTD basis. Over 12 months the airline's stock is up 54%. Recently however the shares have been sinking and are now down over 7% since early August. Is it time to start taking profits?
The selling of Ryanair shares is being largely driven by its spat with Spain's airport authority. Ryanair said it was going to cut flights to regional airports in Spain after Spanish air navigation manager Aena said it was going to increase airport charges. The airline feels its appeals to the Spanish government are currently falling on deaf ears and it is obviously razor focused on the potential rise in costs this will involve, to the tune of €11 per passenger.
Ryanair’s regional retreat is being regarded by airlines analysts as more of a strategic manoeuvre than a structural setback. The company is strengthening its presence in major Spanish airports and continues to show strong passenger growth, although it is pulling out of some key airports like Tenerife Norte.
"Pressure on Aena and the proposed fee hikes will set the tone for the coming months, while on the stock market the share remains in a key range, with investors closely watching the outcome of this standoff with Spain’s airport operator," said Ion Jauregui, an analyst with ActiveTrades.
In this article we take a closer look at Ryanair's last set of financials (July) and also at some of its core metrics. How do these stake up in the airline sector, and does the stock still look like good value, or is it now time to sell?
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