Ryanair CEO: 'We're Europe's Southwest Airlines'

The big European airlines can't "walk straight and chew gum at the same time," and that has created an opportunity for Ryanair to grab more share of the short-haul market, CEO Michael O'Leary told CNBC on Monday.

The low-fare airline recently ordered 175 Boeing 737s to beef up its fleet, primarily because of "exploding flag carrier airlines in Europe," O'Leary said.

The Ryanair chief told CNBC's "Power Lunch" that those money-losing carriers are cutting back on short-haul operations and that passengers are trading down to low-fare specialists—led by his airline.

"We're the Southwest Airlines of Europe," O'Leary said.

The CEO would decrease fares even further if he were allowed to remove one of the toilets and one of the galleys from each plane.

"I think the regulators are coming around to our point of view, particularly on short-haul flights," O'Leary said. "We don't necessarily need three toilets or a second galley at the back of the aircraft."

Taking seating capacity to 196 or 199 from 189 could let Ryanair cut ticket prices another 5 percent, which would be savings of about 500 million euros for its 80 million customers, he added.

(Read More: Ryanair CEO Wants Planemakers to Cram in More Seats)

He also took aim at European bureaucrats, whom he said are holding back growth.

"One of the few successes the European Commission has had in the 1970s and 1980s was airline deregulation," O'Leary said. "It's worked so well that all their flag carrier airlines are losing money or going bust."

Officials have tried to roll back deregulation over the past 15 years, he said. "It's too late to put the genie back in the bottle, but that doesn't stop a lot of idiots in Brussels [from] trying very hard."

By CNBC's Justin Menza. Follow him on Twitter @JustinMenza.