Morning Note: Market news and an update from Ryanair.

Market News

October non-farm payrolls came in well below expectations – 12k versus 105k forecast. As expected, the unemployment rate held at 4.1%. The 10-year Treasury yield moved up to a 4-month of 4.4% as the expectation for aggregate rate cuts by end of 2025 reduced. Gold slipped to $2,735 an ounce.

The dollar index dipped below the 104 mark, reversing gains from the previous session as investors prepared for the upcoming presidential election. Polls suggest the results is too close to call. An NBC News poll showed the race deadlocked at 49%-49%, while an NYT/Siena survey had Kamala Harris ahead in five of seven swing states. A poll showing the VP leading in Iowa was probably an outlier.

In Asia this morning, equities edged higher ahead of a meeting in which policymakers are expected to approve a fiscal stimulus package: Hang Seng (+0.4%); Shanghai Composite (+1.2%). Goldman sees 20% upside for Chinese stocks. Japan was closed for a holiday.

Gilts have recovered some of their poise – the 10-year yield is currently 4.46%, below Thursday’s 4.56% high. Sterling trades at $1.2973 and €1.1909, while the FTSE 100 is currently up 0.3% at 8,195.

Brent Crude rose to $74.75 a barrel after OPEC agreed to push back its December output hike by one month and Iran stepped up its rhetoric against Israel.

Berkshire Hathaway’s cash pile reached a record $325.2bn last quarter as it cut its stake in Apple by roughly 25%.

Source: Bloomberg

Company News

Ryanair Holdings has this morning released results for the financial half-year to 30 September 2024. The company see moderating air fare declines in the current quarter but has cut its passenger growth target for next year because of delivery delays from Boeing. In response, the share price is 3% lower in early trading.

Ryanair is Europe’s largest airline group, is the parent company of Buzz, Lauda, Malta Air, Ryanair, and Ryanair UK. The company carries around 200m guests p.a. on c. 3,600 daily flights from 95 bases. It connects almost 234 airports in 37 countries on a fleet of over 600 aircraft. Events over the last few years highlight that many of the factors driving profitability in the airline industry are outside the group’s control. However, the company believes it is better placed to cope with industry issues – Ryanair has significantly lower costs per passenger than its rivals and this advantage is expected to improve as the group takes delivery of new efficient aircraft. With 340 Boeing 737s on order, the group is aiming to grow passenger traffic to 300m p.a. by 2034.

Many customers are switching to Ryanair for its lower air fares. As a result, the company is capturing record share gains across most markets. During the half-year, passenger numbers grew by 9% to 115m, offset by a decline in fares. Total revenue rose by 1% to €8.69bn, made up of a 2% decline in scheduled revenue to €5.95bn and a 10% increase in ancillary revenue to €2.74bn.

The company undertakes fuel hedging to smooth out cost volatility – the group currently has 85% of H2 FY25 covered at $79/barrel and 75% of FY26 at $77/barrel. Operating costs performed well in the first half, rising 8% (lagging behind 9% traffic growth) to €6.68bn, as fuel hedge savings offset higher staff and other costs due, in part, to Boeing delivery delays. After tax profit fell by 18% to €1.79bn.

Ryanair has one of the strongest balance sheets in the industry. At 30 September, net cash stood at €0.6bn. In addition, all the group's owned Boeing 737 fleet (580 aircraft) are unencumbered, which significantly widens its cost advantage over competitor airlines, many of whom are exposed long term to expensive finance and lease costs.

The company has a policy to return approximately 25% of prior-year profit after tax by way of ordinary dividends, with surplus cash being returned through special dividends and/or share buybacks. This morning, an interim dividend of €0.223 has been declared. A €700m share buyback programme was completed in August, with an €800m follow-on expected to be completed by mid-2025.

The company continues to target between 198m and 200m passengers in FY25 (+8%), subject to no worsening of current Boeing delivery delays. However, the group has cut its passenger growth target for FY26 from 215m to 210m because of delivery delays. Forward bookings suggest that demand in the current quarter is strong and the decline in pricing appears to be moderating. Full-year unit costs are expected to be broadly flat, as fuel hedge savings, strong interest income, and some modest aircraft delay compensation will largely offset ex-fuel cost inflation.

Source: Bloomberg