Is Ryanair CEO Michael O’Leary “talking his book” or does China really threaten Boeing and Airbus (BA, RYAAY, EADSY & GE)
Ryanair Holdings PLC ( RYAAY , quote ) Chief Executive Officer Michael O'Leary is talking up the potential of a big order from Commercial Aircraft Corporation of China, which is a direct threat to Boeing ( BA , quote ) and European Aeronautic Defence & Space Co.'s Airbus ( EADSY , quote ). At stake is a buy of 200 to 300 jets for Ryanair Holdings PLC. In an interview with James T. Areddy and Andrew Galebraith of The Wall Street Journal , O'Leary stated that, "You could not fail to be impressed by the resources they are putting into" Commercial Aircraft Corporation of China, which is run by Beijing. In the article, "Ryanair Trumpets Planes from China," it was noted that the single-aisle C919 from China, equivalent to a Boeing-737, already has 200 orders. General Electric ( GE , quote ) has placed an order for as many as ten of the C919s for its leasing division.
Ryanair, as noted by The Wall Street Journal , is the biggest discount carrier in Europe by passenger numbers. Buying from China would be a tremendous blow to Boeing (BA) and Airbus (EADSF), particularly when so much of the airline's hypothetical future growth will be in Asia, the home turf for Commercial Aircraft Corporation of China.
While the airline industry in the developed world is weak, as manifested by the recent bankruptcy of American Airlines ( AMR , quote ), Ryanair is up almost 15% for the quarter. Growth for both sales and earnings, on a quarter-by-quarter basis, is over 20%. Unlike many airlines, Ryanair makes money, posting a profit margin of 11.88%. Now around $30.70 a share, the mean analyst target price for Ryanair (RYAAY) over the next year is $41.43.