BA, Iberia Deal Like Two Staggering Drunks: Ryanair CEO
The proposed merger between British Airways and Iberia would be bad for consumers as the flag-carrying airlines would raise ticket prices on their competing routes, Michael O'Leary, CEO of discount Irish carrier Ryanair, told CNBC Friday.
"I would characterize it as two drunks holding each other up on the way home," O'Leary said. "All you get when you put two high-fare, loss-making airlines together is even higher fares and even bigger losses."
"I think it's great for Ryanair's business," O'Leary added.
If the preliminary agreement for the $7 billion deal gets the go-ahead from shareholders, the merger would create the world's third-largest airline by revenue. It's expected to be complete by the end of 2010.
BA and Iberia said in a joint statement that the merger would provide "enhanced scale to compete with other major airlines and participate in future industry consolidation."
O'Leary has long predicted consolidation in the European airline sector and said it will be left with four big carriers, of which Ryanair would attempt to corner the low-fares market.
"We move towards our vision of what I think would be four large airlines in Europe: BA; Lufthansa; Air France and Ryanair," he said.
- Watch the full CNBC interview with Michael O'Leary above.
"Ryanair will be the only one offering low fares and guaranteeing no fuel surchages," he added.
The European Competition Commission likely won't object to the merger, but the airlines would have less incentive to compete on the routes they both operate in, he said.
"I don't see any major competition issues given that there's very little crossover between BA and Iberia. But I think it doesn't change much," he said.
"I think it's bad for consumers because clearly you put the two together they'll jack up fares on routes where they compete," he said.
"There has never been an airline merger in history that has not been about jacking up fares … that's why each of these mergers applies for antitrust immunity," O'Leary added.
Meanwhile, Virgin Atlantic said in a statement that regulators in Europe and the US need to be alert to BA's growing dominance as it might not be in the consumers' best interest.
"The BA/Iberia merger will increase BA's dominance at Heathrow with 44 percent of takeoff and landing slots this winter. It is impossible for any other airline to replicate their scale," Virgin Atlantic said.
British Airways CEO Willie Walsh told CNBC that the merger was a necessary step in the face of major changes in consumer spending brought about by the financial crisis.
"People need to realize, this is an industry that is under severe stress. This is an industry that has been hit harder than probably most as a result of global economic downturn. We've got to make changes … we're witnessing structural changes in consumer behavior," Walsh said.
Consolidation is only part of the answer and the real work has to be achieved within the operating airlines, Walsh added.
"We believe that long-haul, premium travel will recover when global economies start to recover," Walsh said.
- Watch the full interview with Willie Walsh here >>>
O'Leary also told CNBC that Ryanair is looking to expand its fleet from 200 to 300 aircraft by taking delivery of 100 new aircraft from Boeing over the next 4 years.