Michael O'Leary, CEO of Ryanair (left) and Willie Walsh, CEO of International Consolidated Airlines Group. Picture: BLOOMBERG/SIMON DAWSON
Michael O'Leary, CEO of Ryanair (left) and Willie Walsh, CEO of International Consolidated Airlines Group. Picture: BLOOMBERG/SIMON DAWSON

When shareholders narrowly voted to approve a possible €99m bonus for Ryanair Holdings CEO Michael O’Leary in September, it seemed unlikely they’d actually have to pay him the money.

The terms of the reward plan require O’Leary to get the stock price back above €21, and at the time of the AGM it was languishing at less than €10. (Alternatively he needs to double net profit.)

How times have changed. On Friday the shares jumped as much as 11% after Ryanair reported stronger-than-expected Christmas sales and ticket prices. The stock has gained almost two-thirds since the AGM, meaning O’Leary’s windfall is back within grasp.

His stock options are triggered if the share price exceeds €21 for a four-week period between April 2021 and March 2024.

A year ago I wrote that Ryanair’s bonus plan is pretty egregious because the share price might jump for reasons that have nothing to do with O’Leary’s skills as a manager. Guess what? That’s exactly what has happened — in myriad fortunate ways.

European stocks have rallied since September thanks in part to the massive liquidity boost provided by the US Federal Reserve. And airlines stocks in general have far outstripped the average for a variety of economic and structural factors.

British Prime Minister Boris Johnson’s thumping UK election victory means a no-deal Brexit is off the table (for now) and has boosted the pound, which is positive for Ryanair’s British revenues. And Thomas Cook Group’s insolvency and cash-strapped Norwegian Air Shuttle’s diminished ambitions have supported ticket prices because of less competition.

Another factor supporting prices is the grounding of Boeing’s 737 MAX following two fatal crashes, which means an expected surge of aircraft capacity hasn’t materialised.

Ryanair is, of course, a big 737 MAX customer and Boeing’s inability to deliver those planes has been extremely disruptive for O’Leary and limited his ability to expand. Yet one silver lining is that his airline has cut back on less profitable routes and is no longer struggling with a pilot shortage, which contributed to recent labour unrest and investor concerns about rising personnel costs.

One day the 737 MAX will fly again, at which time a capacity glut will probably re-emerge; analysts at Citigroup note that the size of the 737 MAX order book in Europe is equivalent to 9% of the continent’s entire aircraft fleet.

While analysts have turned more positive on Ryanair shares, the stock is 14% higher than their average price target, according to Bloomberg data. Based on the company’s updated profit guidance for the year to March of about €1bn, the stock trades on a steep 18 times earnings. Higher fuel prices amid the conflicts in the Middle East could yet bring the airline sector back down to earth.

Still, O’Leary has a decent shout at getting his money for doing very little. That shows how misguided Ryanair’s pay practices were.

• Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times. 

Bloomberg