Ryanair boss: just 5 airlines will survive
O’Leary sparks storm by claiming rivals will be gobbled up or wiped out across Europe – as summer of strikes looms
RYANAIR boss Michael O’Leary infuriated his rivals last night by predicting a series of takeovers that he believes will soon leave just five main airlines operating in Europe.
In a provocative interview with The Mail on Sunday, O’Leary suggested that London- listed Wizz Air, Norwegian Air, Alitalia and Air Portugal will all fall into the hands of larger peers in the next five years.
He said many other firms would be forced out of business as they contend with steep fuel prices, Brexit uncertainty and another summer of delays and cancellations caused by strikes.
O’Leary claimed the only big survivors would be easyJet, Germany’s Lufthansa, Franco-Dutch giant Air France KLM, Internat i onal Airlines Group – t he FTSE 100-listed owner of British Airways – and Ryanair.
‘You are going to see more failures and more consolidation,’ he said. ‘I think in Europe... five major airlines will control over 80 per cent of the traffic.
‘Everybody else in the next five years is either going to be taken over by, become a partner of, or be subsumed into one of those groups.’
Flybmi, Germania, Primera Air and Cobalt of Cyprus have all gone bust recently, while Norwegian Air and Thomas Cook’s airlines arm have been the subject of takeover rumours this year.
O’Leary added: ‘The obvious developments, as we would see it: I think IAG will eventually buy Norwegian; I think that would lead to Lufthansa probably buying Wizz; I think it’s inevitable eventually that when the Italian government stops screwing around with Alitalia they will finish up back in the Air France KLM family; Tap [Air Portugal] will finish up as part of IAG.’
An industry source last night described O’Leary as a ‘Machiavellian’ and a ‘troublemaker’.
A Norwegian Air spokesman said O’Leary’s comments had ‘no root in reality’, adding: ‘Norwegian has been through a period of significant growth and as has been previously announced the airline will change its strategic focus from expansion and growth to profitability.’
Willie Walsh, chief executive of IAG, last week declined to rule out a future bid for Norwegian, telling reporters: ‘ Never say never, but I think it’s unlikely.’
His firm previously looked at making a bid but chose not to push ahead with a takeover earlier this year.
O’Leary told The Mail on Sunday that Ryanair is planning to grow ‘organically’ by increasing its existing operations rather than buying rivals. But he added: ‘Opportunities, though, crop up.’
He ruled out any interest in buying Norwegian Air or Thomas Cook’s airline business.
Airline executives warned last week that the coming summer could be just as bad for delays and cancellations as 2018 when they are estimated to have cost the EU economy £15.2 billion.
The industry claims that 60 per cent of the delays were due to air traffic control disruption including from strikes in France and Germany. Lengthy hold- ups result in the airlines having to pay substantial compensation to passengers.
HOW many Ryanair passengers have not, at s o me point on their travels, been frustrated to learn that the airport they are being flown to is more than an hour away from their intended destination? The answer: at least one.
‘I’ve never!’ says Michael O’Leary with a glint in his eyes. The longstanding chief executive acknowledges that Ryanair is renowned for utilising ‘secondary’ airports, making it the butt of some ‘good jokes’. But he says times are changing – three quarters of his planes now land at ‘primary’ airports.
Have passengers noticed this customer- friendly switch? Perhaps not. In January, Ryanair claimed the dubious honour of being named as British flyers’ least favourite short-haul airline – for the sixth year in a row – by consumer group Which? During 25 years at the top of Ireland’s most famous low-cost airline – which now attracts around 150 million passengers annually – O’Leary has built up a reputation as the industry’s most outspoken and controversial boss.
Living up to this image, the Irishman predicts that a number of his rivals will be bought by their peers, dismisses gender pay gap reporting as ‘meaningless rubbish’ – and even questions the footballing ability of a former England captain. It’s difficult to escape the conclusion that O’Leary quite enjoys being seen as the bad boy of the airline industry.
‘It’s not a question I enjoy it,’ says O’Leary. ‘We’re trying to grow up a little bit. We’re trying to be less confrontational than in the past. We have misbehaved in the past. We were inclined all the time when a newspaper would raise a genuine issue, we’d go up in a storm of, “Oooh! We’ll threaten to sue you!”
‘Now we say, look, if we’ve made a mistake, we’ll come out with our hands up and say we’re sorry we made a mistake. But it is what it is.
‘Do I enjoy being the bad boy? No. Do I want to be the good boy? No. But as long as we’re continuing to deliver lower fares, more choice and a better service for our customers – and customers continue to flock to us – then we will live with whatever reputation we have.’
O’Leary is speaking to The Mail on Sunday in the lobby of a plush conference centre in Brussels. Along with the chief executives of British Airways owner IAG, easyJet and others, he is here for the annual Airlines For Europe summit.
Many corporate bosses do not enjoy the limelight of such events. This could not be said for O’Leary, who happily skips between the main stage and backrooms of the conference to be filmed on European television stations. As is his trademark, O’Leary spends most of the day with his glasses propped up in his mane of bushy grey hair.
O’Leary, 57, joined Ryanair as a director in 1988, having started his career at accountancy giant KPMG, and has been chief executive since 1994. The airline started out in 1984, when it carried passengers in a 15-seater Bandeirante aircraft between Waterford, in South East Ireland, and London Gatwick. This year, despite being the bete noire of consumer groups, O’Leary expects Ryanair to fly 154 million passengers across Europe – up from 142 million in 2018.
However, these impressive numbers are not translating into financial strength. Rising fuel prices, flight disruptions caused in part by air traffic control strikes in mainland Europe and fierce competition have forced Ryanair to downgrade profit expectations twice recently. The looming prospect of Brexit – which Remainer O’Leary is vehemently opposed to – has not helped.
It could be worse for Ryanair. Flybmi, as well as a number of other small European carriers, have collapsed this year. O’Leary predicts there is more to come, and that within five years there will be just five main airlines in Europe: Ryanair, IAG, Germany’s Lufthansa, Air France KLM and easyJet.
In a series of blunt forecasts that are likely to irk his rivals, O’Leary predicts IAG will buy Norwegian Air and Tap Air Portugal, Air France KLM will acquire Alitalia and Wizz Air will be sucked into Lufthansa.
Who will Ryanair buy? ‘Nobody,’ says O’Leary firmly, before adding that ‘opportunities, though, do crop up’. He does rule out any interest in Norwegian Air and Thomas Cook.
Ryanair surprised the industry last month when it announced that O’Leary had signed a new – and potentially lucrative – five-year contract, keeping him at the airline until at least 2024. The boss had previously hinted that he may be on his way out this year, telling reporters he was ‘not sure Mrs O’Leary would be happy’ if he stayed on. ‘I’ve been suggesting that for 33 years,’ he now clarifies. As part of a company restructure, O’Leary will be chief executive of Ryanair as a group, while new bosses will head up four divisions: the main airline, Ryanair UK, Poland’s Ryanair Sun and Austria’s Laudamotion, which the firm bought last year.
As part of his deal, O’Leary – already one of Ireland’s richest men with an estimated net worth of around €1 billion – is sitting on a potential €100 million windfall. The deal enables him to buy 10 million shares in the firm at their February price – just over €11 – if Ryanair’s profits double to €2 billion or its share price rises to €21 in the next five years.
In the coming weeks, Ryanair – along with all other large British employers – will have to file its latest gender pay gap report. Last year’s figures did not make for pretty reading, with the airline revealing its male employees are paid on average 72 per cent more per hour than female colleagues – an enormous gap, even by industry standards. Does Ryanair have a problem? ‘Complete and utter nonsense,’ says O’Leary. ‘The chal- l e n g e . . . wh e n you get these nonsensical pay reports – which are meaningless rubbish – is you have a huge proportion of pilots who are male and a disproportionate amount of women are cabin crew.’
He says Ryanair is trying to fix the disparity by recruiting more female pilots and more male cabin crew. He also said last week that he would favour a woman replacing him as chief executive of Ryanair one day.
O’Leary argues that his industry, and chief executives in general, receive an excessive amount of scrutiny on pay, illustrating his point using football’s Premier League.
‘Nobody ever says anything about the Premiership football clubs,’ he claims. ‘But they talk about CEO pay – it’s always, “Uuuuh, you’re paid a million, five million a year”.
‘ Bloody Premiership football! Wayne Rooney, or whoever it is, is having £20-25 million a year – for what? Kicking a football. And he doesn’t even do that well any more.’
How many chief executives would risk offending millions of customers with controversial comments about national sporting icons and gender pay gaps? The answer is: at least one.
We misbehaved in the past... now we’re trying to grow up a little bit
Wayne Rooney – or whoever it is – gets £25m a year. For what? Kicking a ball