Specter of strike looms over Ryanair (RYAAY) over labor issues – 13th June 2022

Shares of Ryanair Holdings (RYAAY Free Report) have fallen 25.4% year-to-date, underperforming its industry’s 16.2% drop.

Image source: Zacks Investment Research

The stock could face further hiccups as RYAAY’s cabin crew could possibly go on strike in many European countries during the summer season. By a Bloomberg reportwage negotiations with two Spanish unions (SITCPLA and USO) failed.

Following Ryanair’s exit from negotiations, unions accused RYAAY, who currently carries a Zacks Rank #5 (Strong Sell), of acting in bad faith. The unions intend to return for new negotiations.

You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A representative of the SITCPLA trade union group said: “We are coordinating our actions with our European counterparts.” Apart from the two unions, workers’ organizations in countries such as Belgium, France, Italy and Portugal are also in favor of drastic action if Ryanair does not agree to resume dialogue.

In fact, if this impasse persists and the threat of a strike materializes, Ryanair’s plans to generate substantial traffic and revenue during the usually busy summer season could take a hit.

Last month, RYAAY management forecast that the load factor (percentage of seats occupied by passengers) would reach pre-pandemic levels at 94-95% in June-August. RYAAY CEO Michael O’Leary said at the time: “Bookings over the past few weeks have continued to strengthen – the numbers are getting stronger and the average fares paid over the summer are increasing.”

It will be interesting to see if the labor issue above gets in the way of those plans. Stay tuned for further updates on this burning issue.

Actions to consider

Top-ranked stocks within the broader transportation sector include:

Golar LNG Limited (LNG Free Report) currently has a Zacks Rank #2 (Buy). GLNG has a decent surprise history, as its earnings beat the Zacks consensus estimate in three of the previous four quarters and missed the mark once, with the average surprise being 42.1%.

Shares of Golar LNG have risen more than 100% in one year. The strength of the LNG market boosted the stock. Rampant inflation has sent oil and natural gas prices soaring. Moreover, in the midst of the Russian-Ukrainian war, Europe is likely to seek gas supplies outside of Russia. This should boost demand for LNG vessels, which bodes well for GLNG.

South West Airlines (LUV Free Report): The continued recovery in air travel demand bodes well for Southwest Airlines. Anticipating a steady improvement in bookings, the carrier expects to turn a profit in the last three quarters of 2022 as well as for the full year. LUV management expects operating revenue to increase 12-15% in the second quarter of 2022 compared to the level of the comparable period in 2019. LUV sees strong bookings for spring and summer travel.

The positivity surrounding Southwest Airlines stock is evident from the Zacks consensus estimate for current-year earnings revised more than 100% higher in the past 60 days. LUV has a growth style score of B.

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