Ryanair chief warns of possible Aer Lingus bankruptcy

Michael O’Leary, Ryanair’s CEO, has warned that his carrier’s main Irish rival, Aer Lingus, may end up going bankrupt if the price of oil reaches $200 per barrel. According to a report in the Belfast Telegraph, O’Leary stated that nearly half of all airlines would likely declare insolvency, if the cost of oil continues its dramatic rise and ends up hitting the significant psychological threshold of $200. “Only the strong airlines would survive and that would be British Airways, Lufthansa, Air France and Ryanair,” the outspoken Ryanair chief is reported to have said.

Some journalists and industry analysts have hinted that Ryanair may decide to take over Aer Lingus if it was, indeed, close to bankruptcy, considering that its Irish low-cost rival already controls 29 percent of the stakes in Ireland’s primary airline. O’Leary, however, rejects this speculation. Yet it is well known that in 2006, Ryanair tried to initiate a hostile take-over of its main competitor, which ultimately failed. The discount airline also attempted to merge with Aer Lingus last year, but this decision was struck down by the European Commission.

Stephen Furlong, an industry analyst, observed that if oil were, indeed, to hit $200 per barrel, all airlines would be “massively loss making.” The real danger for commercial carriers is that $200 oil is hardly just a distant, and unrealistic fantasy. Arjun Murti, who is affiliated with Goldman Sachs, predicted earlier this year that oil would hit the $200 threshold within less than two years. The current price of oil stands at $135 per barrel, hitting a new record last Thursday.

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