Is it time for Michael O'leary to go?

Z

z106

Guest
After the monumental mistake that Michael O'leary made in not hedging oil, is it time for him to go?

i.e. Is this too big a mistake to forgive him on ?

Ryanairs defence this evening on teh news was laughable.
Their defence was that they are experts in running an airline - not in predicting the short term trends of oil.
i.e. Don't blame us they said.

But surely if that is the case, then that was all the more reason to hedge ?
i.e. Eliminate the risk where you lack expertise - instead they did the opposite.
(And besides - the buying of oil is an integral part of running any airline. Managing your oil risk is something that airline experts should not get so wrong)

Because - by choosing not to hedge was in effect ryanir playing the market by effectively going short/static on oil - of which,by their own admission, they are not experts.

And it has cost them dearly.
 
So they correctly hedge 9 times out 10 and he should go because he gets it wrong once...

if he could guess what way the oil market went 100% of the time then he wouldn't need an airline to make his millions...
 
jhegarty said:
So they correctly hedge 9 times out 10 and he should go because he gets it wrong once...

if he could guess what way the oil market went 100% of the time then he wouldn't need an airline to make his millions...
Click to expand...

COrrectly hedge 9 out of 10 times?

I thought ryanair were famed for not hedging?
 
this has to be the most ridiculous suggestion on AAM since I joined!
OLeary and ryanair have cash to burn and will emerge stronger than ever before after the downturn which most likely will decimate the weaker competition.
as the competition wilt do you think ryanair might just raise prices?
come on folks......!! think!
 
I'd say Ryanair needs Michael more than ever now, talk of oil going to 500 dollars a barrel being a possibility and home heating bills quadrupling, also Michael is going to reduce his ticket prices for Christmas by 10%. After this winter we'll see which airlines are left standing.
 
I like O'Leary and I certainly think Ryanair are better with him in charge but if I was a major shareholder, I would be telling O'Leary to lose the ego trip he seemed to be on for the past couple of years. O'Leary said they can't predict oil which is fair enough but he also stated that he wouldn't hedge at over $100 because he saw oil price falling so which is it. He knew enough about oil prices to make that call. Not hedging at all was a mistake and they are paying for it now with hedge prices starting upwards of $120. He has to accept responsibility. At least though they have certainty for the rest of the year with fuel hedged and are well able to survive a small full year loss. He also has to accept repsonsibility for the €93m paper loss on Aer Lingus shares which was a dumb move. Ryanair will survive but O'Leary has made enough enemies and gave enough stick over the years. He will have to take some now.
 
For all the good things O'Leary has done, he has to take reponsibility for the fuel issue as he is in charge
Have to wonder as well how much money Ryanair have lost to date and will loose in the future via the Aer Lingus deal. If any other head of a company made an investement like that, there would be calls for his head
Throw in the money Ryanair have lost in pointless court cases with the DAA and others which they never seem to win and you have to wonder if O'Leary is loosing his touch
 
markowitzman said:
this has to be the most ridiculous suggestion on AAM since I joined!
OLeary and ryanair have cash to burn and will emerge stronger than ever before after the downturn which most likely will decimate the weaker competition.
as the competition wilt do you think ryanair might just raise prices?
come on folks......!! think!
Click to expand...

Well - according to the media, his decision not to hedge cost ryanair 'hundreds of millions' of euro.
Throw in the aer lingus debacle and you are probably not too far away from half a billion if those figures are to be believed.

Like - that's a lot of cash in any mans language.

Just how much would he have to lose before you would question his position?
 
There is a lot of guff being talked about hedging.

If you can afford not to hedge, then there is no compelling reason to do so.

It must be borne in mind that hedging is a zero-sum game - you cannot 'make money' (which includes cutting losses) at it (on average) unless you somehow believe that you can (on average) beat the market.

One appropriate use of a hedge is where you pay a premium that you can afford in order to avoid a risk that you can not afford.

Another possibly appropriate use of a hedge is to smooth out earnings - so that fluctations in oil prices do not directly impact on your profits; However, the cost of doing this is (on average) lower profits, because you have to pay someone else for shouldering the volatility risk. So the business case is not so compelling.

I have no idea how much Ryanair has 'lost' due to not hedging. I suspect the sum is far smaller than is being reported in the business media. The current reduction in profits is not the same as the loss incurred through not hedging. To establish whether Ryanair have been in the wrong here (and have actually lost money through not hedging) you would need to:

1. Formulate an oil price hedging strategy.

2. Apply that strategy retrospectively to Ryanair for the past, say, 5-10 years. In many years, Ryanair would have wasted money by paying for hedges. In other years they would have made money\cut their losses through hedging.

Only by performing such a test can you make any sort of informed judgment. I am not holding my breath for our lazy business journalists to do so.

You would have to back-test several hedging strategies before you could say which of them would have been optimal. None of this would tell you what sort of hedging strategy would be optimal for the future.

In what amounts to the same thing as hedging, we have oil companies who sold forward their production. They have lost out on huge windfall profits as a result. I don't see the same coverage of these 'blunders'. Certainly, I don't see any calls for resignations.

Without considerably more detailed critical analysis, the suggestion that failure to hedge oil prices is a massive blunder remains far from proven.
 
Fair points but I think the main problem and one of the main criticisms is that Ryanair and Michael O'Leary have introduced volatility into to their results based on their decision to let their hedges expire and O'Leary's big statements on how he wouldn't hedge at levels over $100. The fact that they have now hedged the rest of the year at an average of $130 shows that they know they have made a mistake. By the way I wonder if this will come back and bite him as speculators are now betting that oil will fall for the fist time since early 2007!! O'Leary's problem is that he likes making headlines and he enjoyed making fun of other airlines for hedging at levels that he has now hedged at. He gets enough positive press so I am sure he won't mind a bit of negative press for once. Not like he gives a damn.

I still think he has more questions to answer over the Aer Lingus shares than the oil prices and hedging. Knowing Michael O' Leary though, I will probably be eating my words this time next year!!
 
Bronte said:
I'd say Ryanair needs Michael more than ever now, talk of oil going to 500 dollars a barrel being a possibility and home heating bills quadrupling, .
Click to expand...

What !? Who mentioned 500 dollars a barrel ? What timeframe were they talking about ? Got any links to share ? 150 is bad enough...500 though :eek:
 
Pique318 said:
What !? Who mentioned 500 dollars a barrel ? What timeframe were they talking about ? Got any links to share ? 150 is bad enough...500 though :eek:
Click to expand...

A member of OPEC said it over teh weekend at their meeting.

The time frame they gave was within a few years.

It was in yesterdays news.

A quick google shoudl get it i'd imagine.

In fact - here it is
 
qwertyuiop said:
A member of OPEC said it over teh weekend at their meeting.

The time frame they gave was within a few years.

It was in yesterdays news.

A quick google shoudl get it i'd imagine.

In fact - here it is
Click to expand...


demoivre

Probably some deluded doom and gloom fool who doesn't understand that the demand for oil isn't perfectly inelastic
Click to expand...
Bullseye with the first dart. :D
 
Time to go? No!

All that has happened is that Ryanair have felt full oil costs 6-12mts before all the other airlines feel them. Cheap hedging cover is rapidly running out at all other airlines and they will be soon be just as exposed as Ryanair has been for the past few months. The vast majority will most likely have substantial losses this year, whilst Ryanair looks set to either break even or record a tiny loss (€60m is equal to just 3% of cash reserves) whose magnititude pales in comparision to recent profits.

How dare you question whether the king is dead!! Next you'll be looking for Count Quinn to pack it in! :)
 
You must log in or register to reply here.
Back
Top