If Hitler invaded hell,” Winston Churchill once remarked, “I would make at least a favourable reference to the Devil in the House of Commons.” Ryanair views the downturn in much the same way. “Even during deep recessions,” chief executive Michael O’Leary crowed on Monday, Ryanair “continues to deliver growth”. While other European airlines are losing money and having to cut back on routes, the low-cost carrier is expanding capacity, slashing ticket prices to fill seats. Everyone is hurting in the tough times. But Ryanair’s higher-cost competitors are hurting more.

This should make Ryanair, already Europe’s largest airline by market capitalisation, a recession winner. Expanding through the downturn will allow it to increase market share which it can, then milk when the recovery comes. It is a credible theory, yet not without risks. In the first quarter, Ryanair carried 11 per cent more passengers than it did in the same period last year. But in spite of the rise in traffic, ticket sales of €609m were 3 per cent less. Indeed, if it wasn’t for the €152m fall in fuel costs and the €165m of ancillary revenues – which includes the penalties passengers are charged for extra bags or failing to check-in online – Ryanair would have lost money, instead of earning €123m.

Investors are willing to tolerate lower profits now if it means higher profits later – but only up to a point and at the right price. They took fright after Mr O’Leary warned that lower fares per passenger meant that full-year profits would come in at the bottom end of his forecast €200m-€300m range; Ryanair’s share price dropped by 9 per cent. Even so, Ryanair shares still trade on almost 20 times the new forecast earnings. Looking cheap and being cheap are not the same thing.

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