2019 to see more airlines collapse, says O’Leary

Ryanair’s CEO says some low-fare airlines will not survive beyond the end of 2019 due to rising oil prices.

Michael O’Leary warned that surging crude oil prices and a consequent rise in jet fuel costs would probably cause some of its regional peers to go bust during the course of the year. “Clearly US$80 a barrel oil is going to bring casualties in Europe this winter,” he said during a television interview on CNBC.

He went on: “Oil is going to be a driver but I think it will be a driver of change to the competition landscape in Europe. Some of those airlines who couldn’t make money when oil was at $40 a barrel last year, I don’t think will survive this winter if oil remains up at these elevated levels.” The airline itself has bought ahead 90% of its expected fuel needs for the current year at $59 per barrel.

The Irish budget carrier yesterday reported record annual figures for the past financial year, with Europe’s largest low-fare carrier posting €1.45 billion ($1.7 billion) in profit after tax for the year ending 31 March, a 10% rise year-on-year.

It is, however, forecasting lower profits for the coming year of between €1.25 billion and €1.35 billion. “Our outlook for FY19 is on the pessimistic side of cautious,” added O’Leary.

Passenger numbers for the past year were 9% higher at 130.3 million PAX, with Germany, Italy and Spain the airline’s biggest growth markets, stimulated by lower fares. Revenues rose by 8% to €7.151 billion as it opened four new bases in Burgas, Memmingen, Naples and Poznan and launched over 260 new routes. The CEO said that the airline expects to grow its passenger numbers by 7% to 139 million at flat load factors of 95%.

Ryanair has also applied for a UK Air Operator’s Certificate (AOC), which it hopes to receive before the end of the year. Last month it also bought a 24.9% stake in Austria’s LaudaMotion, with plans to increase that stake to 75%, subject to EU merger approval. O’Leary added that LaudaMotion was an “attractive” opportunity as it is an Airbus operator, and that Ryanair was looking for opportunities to grow LaudaMotion’s Airbus fleet to between 30 and 50 aircraft over the next five years, with profitability within three years.

Last month it also began operations on Ryanair Sun, its Polish charter airline, and said that the new charter service looked set to trade profitably in its first 12 months of operation.

 

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