European airlines risk going bust if the price of aviation fuel doesn't fall back, warns Ryanair CEO Michael O’Leary. He believes Norwegian is particularly vulnerable.

”If oil prices remain high over the summer, we won't need to lower ticket prices to beat Norwegian, as Norwegian will go bankrupt anyway,” he tells Dagens Næringsliv.

The sharply rising prices of aviation fuel have struck fear into the industry. The Swedish government has warned of a potential aviation fuel shortage, and several companies have already begun cancelling departures.

However, Ryanair's outspoken CEO Michael O'Leary seems unconcerned by the situation. The Irish low-cost carrier has secured 80 percent of its fuel consumption until March next year and can afford to pay the market price for the remaining 20 percent.

”For some competitors, the situation is precarious – and the gap between them and Ryanair is only getting bigger and bigger. We will continue to offer low prices and our competitors will just keep struggling,” Michael O'Leary tells Norwegian newspaper Dagens Næringsliv.

Michael O’Leary has previously swung at the Hungarian low-cost competitor Wizz Air, which he believes is on the verge of bankruptcy due to high fuel prices and a lack of hedging.

”Companies that are not in a good position and do not have a strong financial standing will face significant financial problems if the current situation persists through the summer and into the autumn,” says the Ryanair boss, who is in Oslo for the Oil Fund's annual investment conference.

He expects that Norwegian NAS +5.85% is one of the companies that could face major problems. He points out that the Norwegian company has a strong position in its home market but will likely struggle to pass on rising fuel prices to higher ticket prices. Ryanair will in any case not actively try to gain market share.

”Regarding oil prices remain high over the summer, we do not need to lower ticket prices to beat Norwegian, as Norwegian will go bankrupt anyway – without any influence from us,” says Michael O’Leary.

Norwegian released its first-quarter report on Tuesday. In connection with it, CEO Geir Karlsen announced that the company had secured 45 percent of its fuel consumption.

”Right now, it looks comfortable, but there are no guarantees for anything given the external environment we find ourselves in,” he tells Dagens Næringsliv.

Norwegian's press chief Catharina Solli does not want to comment on Michael O'Leary’s bankruptcy comments, the newspaper writes.

Source: DI.SE