Answer: when it is a low-cost airline trying to bluff Boeing into believing that it doesn’t need new aircraft.

This morning’s results from Ryanair contained a strong hint that it would shift its strategy from growth to dividend payments from 2012 - exactly as our aerospace correspondent suggested this morning.

While most headlines focused on the company’s 46 per cent rise in second-quarter profits, to €284.8m, savvier analysts pondered the comment towards the end of the chief executive’s statement:

“I regret to report that we have made little progress in our discussions with Boeing for an order of 200 aircraft… we would prefer to grow, but if Boeing doesn’t share our vision, then I believe that Ryanair should change course before the end of this fiscal year and manage the airline over the next three years to maximise cash for distribution to shareholders.”

So Ryanair the growth stock will become Ryanair the income stock, paying the highest possible dividend. If that’s true, then the second-quarter adjusted earnings per share of 26.23c, against a share price of €2.90, suggest an attractive yield. It’s just the sort of stock that an equity income fund manager would buy into: past the capital-expenditure stage, cash-flow generative and preparing to pay dividends. 

But, before you get too excited, read between those lines from O’Leary:

“We won’t continue these discussions indefinitely and have signalled to Boeing that if they are not completed before the year end, then Ryanair will end its relationship with Boeing and confirm a series of order deferrals and cancellations.” 

This is an arch-negotiator sending a message to Boeing, rather than to City fund managers. As our Lex colleagues point out, he tried the similar tactic with BAA.

Anyone who has had to negotiate with Ryanair over anything knows that there’s no stunt it won’t pull (as several luggage-less FT Money colleagues can attest). Do you honestly think that an airline that would charge you £1 for spending a penny is about to give its shareholders 26 cents?

November 2, 2009 6:58pm in Investments | Comment