Ryanair’s travel optimism looks overcooked but it will still win out in the end

“We believe that we can look forward to a strong recovery in air travel, jobs and tourism in H2 of the current fiscal year,” declared Ryanair.

The markets are believers. The airline’s shares have nearly doubled in value since the low point they recorded in the summer of 2020. Since then they’ve been climbing the mountain at the speed of a hungry snow leopard in pursuit of a juicy item of prey.

Investors have bought into the company’s optimistic belief that most European populations will have been vaccinated by September, ushering in a rapid recovery for the bombed-out travel sector.

“The recent strong increases in weekly bookings since early April suggests that this recovery has already begun,” the company said.

Well, maybe. The UK has, for example, told its citizens they can travel, and that’s enough for some people to start booking breaks in the hopes of some summer sun.

Portugal has said UK visitors can come, so long as they have a negative PCR Covid test along with their travel documents. Greece has also opened its tourist season.

The trouble with the virus, however, is that it has a nasty habit of throwing a wrench into the best-laid plans. The Indian variant that currently has scientists and doctors hiding behind their sofas has spooked even Boris Johnson into dropping a promise to reveal when the one-metre plus social distancing rule will end.

It’s entirely possible that holidaymakers are getting ahead of themselves. But while Ryanair might also have to temper some of its optimism, its investors have good grounds to retain theirs.

It’s true that the airline’s numbers for the year ending 31 March show the impact of a horrible case of Covid, with the company describing it as “the most challenging in Ryanair’s 35-year history”.

The €881.4m (£760m) pre-tax loss is a record. Revenues declined by 81 per cent as planes were grounded across Europe. Debt ballooned to €5.4bn (£4.6bn), an increase of €1.2bn (£1bn) over the previous year, even with the company able to call on state-backed job support schemes while benefitting from plummeting fuel costs.

However, on the flip side, Ryanair had a €3.15bn (£2.7bn) cash pile at year end, making the net figure, while still large, a lot less onerous. Several airlines have gone bust through the crisis. A number of national flag carriers – to Ryanair’s intense displeasure – have gone cap in hand to their governments. Compared to them, CEO Michael O’Leary and co are sitting pretty.

Their company still badly needs revenue, but they have proved they know how to go about maximising that.

The Office of Fair Trading memorably once described Ryanair’s use of a legal loophole to hit online customers with extra credit card charges as “puerile and childish”. A few years ago there were even reports about the possibility of charges to use the loo.

You may want to ready your credit card to waft in that direction. It wouldn’t come as the greatest surprise to see such a proposal resurrected, despite more recent efforts to be a bit nicer to customers. Needs as must and all that.

Even if the company’s optimism proves unfounded, Ryanair will be fine. It’s a survivor airline. You’d probably be able to get on a Ryanair flight the day after the apocalypse, just so long as you had some sheep as barter to cover the price of checking in your bags.

Ryanair’s biggest problem in the wake of the market’s assessment of its prospects is that it could complicate the carrier’s desire to get its EU shareholding up to 50 per cent.

The company restricted the voting rights of non-EU shareholders – now including UK nationals – from 1 January this year, to satisfy the admittedly silly rules on airline ownership dating back decades, and to protect its EU airline licences in the wake of Brexit.

A long-standing prohibition on non-EU citizens purchasing Ryanair’s ordinary shares now extends to Britons, while the company’s EU shareholders have 100 per cent of the voting rights but just a third of the economic rights.

Changing that will require the exit of UK (and other) shareholders. Thing is, why would they sell up when Ryanair looks like the best bet for those hoping to ride a recovery in post-pandemic travel even if (as I suspect) it takes longer to materialise than the company hopes?