Tuesday, February 10, 2009

Zignals Stock Charts: Airbus playing hardball with Ryanair

So will Airbus concede a deal with Ryanair? The sum of 300-400 short-haul jets is no splash in the ocean so I suspect Airbus will (eventually) give Ryanair what it wants as it really has no other choice.

Certainly this is smart business from Ryanair to dangle a nice carrot in front of a starved donkey. Of course there is the usual denial

Michael O’Leary, Ryanair chief executive and key senior colleagues have visited Airbus headquarters in Toulouse to outline their plans, but the European group, the commercial aircraft division of EADS, has told the airline that it is not interested at the prices Ryanair is seeking.

John Leahy, Airbus’s chief commercial officer, said: “We are not in discussions with Ryanair about aircraft. That is on the record. We don’t have plans to enter a sales campaign with Ryanair, which would be very expensive and very time consuming.”

The last major deal struck by Ryanair was with Boeing was after the September 11th attacks

The Irish carrier is seeking to repeat its coup of six years ago, when it placed its previous biggest order for 100 aircraft and a further 50 options in January 2002, close to the bottom of the last aviation recession.

It was the biggest order Boeing had ever received for its 737 jets, and Ryanair secured one of the largest discounts ever agreed by the US aircraft maker, which was then desperate for new orders.

While any deal struck with Ryanair is going to be a hardball sum it will at least keep the airline ticking over during the recession. If new orders are anticipated to fall to around 700 new planes a year

Boeing and Airbus have said that they expect new orders to plunge this year to roughly a quarter of the peak combined industry level of more than 2,800 new orders won in 2007.

Then the Ryanair contract will be an important one to secure.

European Aeroanutic Defence and Space Company (EAD) has performed relatively well considering the overall meltdown in the market. The stock made a quiet pop outside of its 1-year decline, although a retest of €9.29 could not be excluded (and would indeed be favoured to shore up demand from buyers).

While not an ideal environment to be making a call; chiefly because of the narrow run up and the potential bull trap (buyers getting caught on the wrong side of momentum) on what looked to have been a nice breakout on Monday. I have attempted to make one for a push to €20 with a stop on a loss of January lows at €12.39. If that failed I would wait to see what the stock did at the rising trendline from October lows.

My call is available (along with others) at Zignals.com.

Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, market alerts, and stock charts website