The market is gloomy about Ferrovial s investment in the UK airports group. It seems to believe the deal destroys over £1bn of value. True, things don t look great for the Spanish construction company. But the market may be too pessimistic.
The budget airline is making serious money and has the firepower to buy back far more than the 4% of its shares it plans to. Airlines like to keep a cushion for a rainy day. But Ryanair isn t nearly as cyclical as legacy airlines. It ought to be more generous. Airlines like to keep a cushion for a rainy day. But Ryanair isn t as cyclical as oldstyle flagcarriers. It ought to be more generous.
Fares are dropping across the board, and so are shares in airline stocks. The simple answer is that there is too much capacity. But that doesn t mean that airlines like Easyjet will stop growing. Its share price drop looks overdone. Investors are worried about overcapacity driving down fares. Easyjet's shares have fallen nearly 10%. This seems unfair. Overcapacity is more of a problem for network carriers. Easyjet actually looks wellplaced to grow through any turbulence.