Ryanair (LON: RYA) agrees to sell its stake in Aer Lingus to British Airways parent company AIG in a move that will bring in a cash injection for O’Leary’s company. This kind of move would boost the share price of any company.
One hurdle present was from the European antitrust agency, but they recently gave Ryanair the green light for the deal as compromises were accepted by both parties involved. This is important because, without the green light from the antitrust authorities, such deals would never be made.
Ryanair has a 30% stake in Aer Lingus and by selling it, not only does it boost the income stream, but it allows it to focus on its core business and expand into new programs as well.
Things cannot be better for the aviation industry as low oil prices are making flights more affordable and it seems that these oil prices are here to stay for some time.
There are two reasons for the above statement, and one is coming from Vienna as the Iran nuclear talks are heading towards a historic agreement. To be clear at what’s in stake, we’re talking about around 1.5 million more barrels of oil on a daily basis that are supposed to be released to a market that is already flooded with oil.
This means that the natural supply and demand law will put pressure on oil prices for some time now as it is difficult to believe that OPEC (Organization of Petroleum Exporting Countries) is going to make changes in production levels to accommodate the new quantity.
The other reason why oil prices may stay low comes from the United States of America as the Federal Reserve is signaling through the voice of its Chairwoman, Mrs. Yellen, that the central bank is ready for a rate hike this year.
However, this is not a bullish statement for the dollar as the number of hikes this year was supposed to be not only one, and if anything the outlook has a downbeat tone for the dollar.
Based on all the above, I am favoring call options for the Ryanair share price with an end of July expiration date as the aviation industry in general and Ryanair, in particular, should do well in an environment in which traveling is growing more and more and oil prices are poised to stay at low levels for the period ahead.
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