Ryanair Executive Predicts Higher Fuel Prices Will Tank Some Competitors

Ryanair does not want to add long-haul service partly because it expects more opportunities will open in Europe and the Middle East as some of its competitors falter and perhaps go out of business amid higher fuel prices, Ryanair chief marketing officer Kenny Jacobs said April 26 at the Skift Forum Europe in Berlin.

“The backdrop for the next three years is that more European airlines are going to go out of business,” he said. “That’s going to happen because aviation fuel is about $75 dollars a barrel.”

Jacobs didn’t name the airlines he expected to fail, but most observers suspect that any airline owned by one of Europe’s three massive holding companies — Air France-KLM, Lufthansa Group or International Airlines Group — might be first to go if costs rise too much, or if there’s an economic downturn. Independent airlines not supported by governments could be most at risk, as fuel prices, which were as low as $45 a barrel last June, continue to climb.

If another airline fails, Ryanair could try to swoop in to claim its assets, as it tried to do with Air Berlin. Among discount carriers, Ryanair rival EasyJet got the biggest prize from the recent Air Berlin bankruptcy, picking up 25 of its its aircraft last year, as well as slots at Berlin Tegel Airport.

Later, however, Ryanair said it was buying up to 75 percent of another airline once controlled by Air Berlin, now call LaudaMotion, giving it access to 21 Airbus aircraft by this summer. With the new planes, Ryanair is growing in Austria and in Germany, where Jacobs said Ryanair accounts for 8 percent of the market, up from 2 percent four years ago. Ryanair plans to continue to adding flights in Germany and will open a Dusseldorf base in June.

Going forward, in addition to Germany, Jacobs said Ryanair sees major opportunities in Spain, Portugal, Turkey, Greece and Scandinavia and Israel. It also expects more opportunities to feed passengers for long-haul flights operated by other airlines.

At one point, it planned to send passengers to Norwegian Air, but that deal fell apart last year. But Ryanair sends its short-haul customers to Air Europa, a discount airline that flies some transatlantic routes, and soon expects to provide long-haul passengers for Aer Lingus, the full-service Irish airline owned by International Airlines Group.

“You’ll go Naples to Dublin with Ryanair, and you’ll go Dublin to JFK with Aer Lingus,” Jacobs said. “We are quite close to getting there with Aer Lingus on that low-cost to legacy carrier transatlantic option and we are open to doing that with all of the big legacy carriers here in Europe. But we won’t do long haul ourselves.”

Brexit Not an Immediate Concern

Brexit remains a long-term threat, Jacobs said, because Ryanair, like all other airlines, could lose its ability to fly between the EU and UK, and within the UK, if negotiators don’t strike a deal that retains the status quo.

At one point, airlines feared they could lose that right as soon as April 2019 but negotiators from the EU and UK now appear likely to sign a transition agreement, allowing them more time to reach a long-term deal. Airlines want an Open Skies agreement similiar to what exists today, allowing any airline to fly any route in Europe, regardless of borders.

“All that does is buy more time, Jacobs said. “That buys 21 more months up until January 2021 for the UK and for the EU to hammer out a new permanent deal. It’s a bandaid for now, and it doesn’t mean everybody can say, ‘Ok that’s fine.’ They still need to work on a new deal for Open Skies.”

Ryanair remains hopeful its route structure will stay in tact.

“What we want to have is that nothing changes,” Jacobs said. “The UK is the European leader when it comes to low-cost airlines. We want the rest of Europe to be more like the UK when it comes to deregulating aviation.”