O’Leary expects Ryanair to benefit from struggling carriers

Ryanair chief executive Michael O'Leary said Scandinavian Airlines, Alitalia and Air Berlin are among carriers he expects to shrink or merge, prompting a growth spurt at Europe's top discount airline after he signed up for five more years in charge.

Other competitors that O'Leary predicts face "cutbacks and consolidation" include Olympic Airlines of Greece, TAP- Transportes Aereos Portugueses, Iberia in Spain and Aer Lingus, in which Ryanair has a minority stake.

Aer Lingus rebutted his comments saying it “certainly doesn’t belong to any club of ailing flag carriers”.

O’Leary last week signed a contract extension that will keep him at Ryanair until September 2019, spanning a period during which he predicts an “endgame” in the transformation of European airlines, with weaker carriers going bust and those network operators that survive shrinking short- haul operations.

Ryanair aims to carry 120 million people a year by the end of the period, compared with 81 million last year.

"There are going to be significant changes in the short- haul industry in Europe, " O'Leary said in an interview in Rome.

“We are seeing this in discussions we have with many airports across Europe, both primary or secondary. All of them are becoming more and more anxious to encourage Ryanair so that we can help them to make up the traffic they are going to lose.”

Aer Lingus said O’Leary was making “broad, sweeping generalisations” and that it operates a successful business model in the fifth year of significant profitability.

"Aer Lingus doesn't lose money and certainly doesn't belong to any club of ailing flag carriers that he's seeking to assign us to," spokesman Declan Kearney said, adding that its trans-Atlantic business is among Europe's fastest-growing.

O'Leary also pointed to tumbling earnings announced this week at Air France-KLM Group - which curbed plans for low-cost flights after a pilot strike wiped €330 million from operating profit - saying the trend will accelerate capacity cuts at Europe's biggest airline.

Rome-based Alitalia will also pare short-haul operations after an investment by Abu Dhabi's Etihad Airways, the number two Persian Gulf carrier, he said.

Alitalia spokeswoman Antonella Zivillica said it had no comment. Some of the airlines highlighted as vulnerable by O'Leary are already cutting back, with Air Berlin planning to pare capacity this winter and into the summer.

Other carriers have been left out of a consolidation trend that has created three mammoth European airline groups - IAG, combining British Airways and Iberia, Franco-Dutch Air France-KLM Group, and Deutsche Lufthansa, which combines the leading German, Swiss, Austrian and Belgian operators.

Lisbon-based TAP may restart a sale process after a 2012 auction attracted one bidder, from Brazil, with Portuguese transport minister Sergio Monteiro saying this month that the government is approached by potential investors almost daily.

Bloomberg