Ryanair boss says Aer Lingus could go bust
25.05.08
Ryanair boss Michael O'Leary has warned that Aer Lingus could go bust if oil hits $200 a barrel, the Irish Independent reports. A spokesman for Aer Lingus hit back, suggesting that Ryanair would be more likely to struggle in a high cost environment.
Mr O'Leary said yesterday: ‘Half the airlines would go out of business if oil hit $200 a barrel. That could include Aer Lingus. Only the strong airlines would survive and that would be British Airways, Lufthansa, Air France-KLM and Ryanair.’
He also dismissed the suggestion that Ryanair, which owns just under 29% of Aer Lingus, would take over its Irish rival if it became bankrupt. In October 2006, Ryanair made a hostile bid for Aer Lingus, however, in June 2007, the European Commission blocked the merger - a decision later appealed by Ryanair.
Stephen Furlong, an analyst with Davy, told the newspaper: ‘We have not seen half [of the fallout from record oil prices] yet. The cash flow of most airlines gets worse towards the end of the year as the season is not as busy as summer. We might see bankruptcies in the winter.’
However, Enda Corneille, corporate affairs director with Aer Lingus, said budget airlines such as Ryanair were more likely to run into trouble on the back of rising fuel charges. He told the Independent: ‘The more established airlines would be in a better position to survive than pure low-cost airlines like Ryanair, as they would not be low-cost any more. If oil hit $200 a barrel, airlines would not be buying aircraft and there would be more grounding of flights.’
Andrew Fitchie, analyst at Collins Stewart, agreed that low-cost airlines such as easyJet and Ryanair could be hammered by the record fuel prices. He said: 'The no-frills airlines are in the eye of the storm. They will have to slash capacity, stay on the tarmac or look at merging. There will be casualties.'
Meanwhile, Ireland's third biggest airline, Aer Arann, said last week it may seek a financial partner and lease out more aircraft on the back of rising fuel costs and an economic slowdown. Mr O'Leary said: ‘The most likely one to go bust at $200 a barrel is Aer Arann,’ but a spokeswoman for the airline said that it was‘is in a healthy financial state, with reserves to enable us to weather any storm’.
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