MIAMI – Ryanair (FR) Michael O’Leary has an unflinching opinion regarding competitors easyJet (U2) and Wizz Air (W6): merge or wait to be taken over by larger carriers when the crisis resolves and industry regains speed.
Last week, U2 indicated that it had rejected a proposed takeover from an unnamed suitor who, according to the Italian newspaper Il Corriere, is no other than Wizz Air which had a serious go at what would have been the Low-Cost Carriers (LCC) marriage of the year after a courtship that lasted at least several months as the first approach is approximately dated May 2021.
The approach is the first sign of a deal in a European industry that has endured 18 months of turmoil and has long been considered ripe for consolidation.
“Consolidation Must and Will Happen”
O’Leary recently told the Financial Times that “easyJet and Wizz Air will either have to be taken over or merge together” or run the risk of being absorbed by larger concerns, such as the IAG Group, Lufthansa of the Air France Group which, as the industry regains strength, are keen to buy other smaller competing carriers or LCC.
The FR CEO went on to add that “consolidation must and will happen. It’s an inevitability, especially coming out of Covid.” The FR’s CEO believes that airlines need size to survive and that the European market, in its actual structure, will not be able to survive in the long term.
Many countries not willing to lose their national carriers unveiled plans to give them financial assistance, a horrific act for Michael O’Leary, to help their imperiled airlines to survive the pandemic crisis.
easyJet CEO Johan Lundgren concurred with Michal O’Leary, at least on one aspect: the fact that the pandemic could lead to industry mergers in Europe. “I think everyone would agree that when you go through situations like this, consolidation plays out,” he recently said.
O’Leary considers that as both U2 and W6 operate a common type fleet of Airbus 320s, a merger would make sense, not to mention that the two carriers operate in different geographical areas. A merger with U2 would thus give W6 a large entry door to Western Europe after having strongly developed in its own Eastern European market during the past 15 years.
Ryanair’s Sustainable Growth
The only worrisome aspect of a merger with U2 would be the necessity to operate from more expensive airports, meaning higher costs on an operating model based on keeping costs as low as possible. “The question would be whether Wizz would improve easyJet’s costs or whether easyJet’s costs would destroy Wizz’s cost base,” said O’Leary.
The CEO also indicated that he was not interested in new acquisitions or mergers fearing a disruption in his airline’s business model. At the same time, he also revealed that he had tried several times to get hold of W6 from the carrier’s founder and investor, Bill Franke."I tried to buy Wizz from him three or four times, but we could never agree on a price" Michael O'Leary, Ryanair CEO Click To Tweet
O’Leary said he was no longer interested in buying W6 since the carrier has now a capitalization of approximately US$7.58bn and a merger or acquisition will only increase FR costs.
The CEO finally indicated that FR has over 200 aircraft on order, sufficient to sustain its growth over the next decade but talks with Boeing regarding Boeing 737-10 planes orders went recently sour and no agreement on price could be reached. He also said he would “gladly play ball with Airbus if it offered a bid 10% cheaper than Boeing’s.”
Featured image: Ryanair Boeing 737-8 9H-QAL. Photo: Albverto Cucini/Airways