Ryanair (LON:0RYA) and IAG (LON: IAG) are two leading European airlines that carry millions of passengers every year. They are some of the most popular brands in Europe. Over the years, Ryanair has transitioned to become the biggest airline in the world by market cap. IAG is the 13th biggest airline with a market cap of over $9 billion.
Ryanair vs IAG share price performance
The goal of this article is to compare between Ryanair and IAG, the parent company of Vueling, Aer Lingus, and British Airways (LON:ICAG). A key issue to have in mind is that Ryanair decided to delist from the London Stock Exchange (LSEG) in 2021. Still, British investors have access to the stock through its ADR but cannot have access to ordinary shares.
Ryanair’s performance has been much better than that of IAG. In the past five years, the Ryanair share price has jumped by over 20% while IAG has shed over 60%. The same divergence has happened in the past 12 months where Ryanair has jumped by 44% and IAG 16%.
Historical performance is not always an indication of what to expect in the future. However, in most cases, it can be a good sign of a business performance. Therefore, because of its strong past performance, I believe that Ryanair is a better investment than IAG.
Business operations
While Ryanair and IAG are airlines, they are quite different in how they operate. IAG’s British Airways is a full-service company that offers both regional and global services. In most cases, these companies tend to be more complicated to run.
They also have thinner margins than regional airlines. And most importantly, they tend to more leveraged. While IAG has a market cap of $9 billion, it is burdened with over 19 billion euros in total debt.
Ryanair, on the other hand, is not all that levered. Indeed, the company has paid back a substantial amount of debt in the past few months and it hopes to be debt-free in the next two years. The company’s CEO said:
“We have two bonds left in 2025 and 2026 of about EUR2 billion that we intend to pay those down in their entirely, which will make Ryanair remarkably a debt-free company in Europe in the next two years.”
Having a good balance sheet has many advantages for both investors and the company itself. For investors, it means that the company will keep most of its revenue, especially now that interest rates are rising.
In addition, Ryanair’s operations are quite simple. It only operates Boeing (NYSE:BA) 737, which simplifies its operations. British Airways, on the other hand, owns planes from Airbus, Embraer, and Boeing.
Ryanair is also entering a period of growth as it has placed a 300 order from Boeing. It expects to receive about 50 new planes by next summer, which will lead to more growth and profitability since newer planes have lower maintenance costs.
Ryanair is also set to benefit from the ongoing Airbus A320 engine woes. As a result, the firm expects that many of its competitors will be grounded, which will be a positive thing for the company.
Most importantly, unlike IAG, Ryanair owns most of its planes. IAG owns some of its planes and leases the rest. By owning its planes, Ryanair is able to avoid the rising leasing costs in the industry.
Finally, Ryanair has started paying back dividends while IAG has not recommended paying any dividend. I feel that Ryanair’s payouts will be sustainable in the long term.
Therefore, it seems like Ryanair is a better investment than IAG by a wide margin. I recommend that you do your research before investing.
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