Airlines

Ryanair CEO says some airlines will not 'survive' the winter due to elevated oil prices

Key Points
  • The Irish airline warned that elevated oil prices — and consequently fuel costs — would probably cause some of its regional peers to go bust in early 2019.
  • "Clearly $80 a barrel oil is going to bring casualties in Europe this winter," Ryanair CEO Michael O'Leary told CNBC's "Squawk Box Europe" Monday.
  • The Irish airline reported a record annual profit, despite concerns over a previous rostering mess-up that triggered a dispute with pilots.
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Airlines could go bust due to higher oil prices, says Ryanair CEO

The chief of budget airline Ryanair said Monday he fully expects some of his European rivals to file for bankruptcy over the coming months.

The Irish airline warned that elevated oil prices — and consequently fuel costs — would probably cause some of its regional peers to go bust in early 2019. A dramatic upswing in crude futures over the past 12 months has weighed on the industry, at a time when major airlines are being forced to adapt to a much more competitive marketplace.

"Clearly $80 a barrel oil is going to bring casualties in Europe this winter," Ryanair CEO Michael O'Leary told CNBC's "Squawk Box Europe" Monday.

"Oil is going to be a driver but I think it will be a driver of change to the competition landscape in Europe. Some of those airlines who couldn't make money when oil was at $40 a barrel last year, I don't think will survive this winter if oil remains up at these elevated levels," he added.

Brent crude futures traded near multi-year highs at $79.16 a barrel on Monday morning, up 0.8 percent, while WTI stood at $71.81 a barrel, 0.7 percent higher.

Record rise in annual profit

The Irish airline reported a record annual profit Monday, despite concerns over a previous rostering mess-up that triggered a dispute with pilots. Yet, O'Leary said he was "pessimistic" over the company's growth prospects in the near-term amid higher fuel costs and no fare growth.

Europe's largest low-cost carrier posted a record 1.45 billion euros ($1.7 billion) profit after tax in its financial year ending March 31. That constituted a 10 percent rise year-on-year, narrowly beating analyst expectations.

Ulrich Baumgarten | Getty Images

However, Ryanair said returns were likely to dip slightly over the coming financial year. The group forecast profit after tax of between 1.25 billion and 1.35 billion euros over the next 12 months, lower than analyst forecasts.

The downbeat tone was in stark contrast to Europe's second-biggest low-cost airline, easyJet, which said last week that it anticipated profits would rise more than 30 percent this year as it benefits from robust travel demand and the collapse of some smaller rivals.