More airlines could fail if high oil prices persist: O’Leary

Ryanair Group CEO Michael O’Leary said more airlines will go out of business or be refinanced this winter if high oil prices and higher interest rates are sustained into autumn, reports Aviation Week. 

AirBaltic is one example, according to O’Leary. “In recent weeks, airBaltic has required a government loan to keep it afloat and there is no possibility of this loan being repaid by the end of August,” O’Leary told Aviation Week, offering his opinion on June 2. AirBaltic’s budget loan of €30 million ($35 million) was granted by the Latvian government to the airline on April 14 and should be repaid by Aug. 31.

On May 29, the Latvian Ministry of Transport reported that airBaltic had made is first loan repayment payment in the amount of €6.4 million. “According to the signed agreement, the loan to the airline is disbursed gradually, and its repayment is also planned in installments, with full payment by Aug. 31 of this year,” the ministry said.

Responding to other recent developments, O’Leary is skeptical of U.S. investment firm Castlelake’s possible offer for UK-based LCC easyJet. “You will also have seen some speculation about possible M&A activity around easyJet this week,” he said. “I’m not sure that an American financier could meet or make a bid for easyJet, but it may put it ‘into play.’”O’Leary said it is hard to determine who will be the first carrier to emerge out of the fuel crisis.

“The longer it goes on, the better it will be for well-hedged airlines like Ryanair,” he says. “But if the crisis ends reasonably quickly, and oil prices fall steeply, then it may rescue some of the less well-financed competitors.”

O’Leary described that scenario as “less than optimal” for Ryanair.

“However, until we know how long the current crisis will continue, it is impossible to estimate who will come out of it better or worse,” he said.