O’Leary predicts oil price spike / rivals going bust
12.06.08
Ryanair's chief executive, Michael O'Leary, said yesterday that he expects the price of oil to dip below $100 a barrel by the end of next year after reaching a ‘short- term’ high of $150 a barrel. Crude oil prices may decline to the lower figure in 12 to 18 months, he said at a press conference in Frankfurt. The fuel spike will offer opportunities for growth as competitors fail to cope and go bust, he added.
Oil is trading currently at about $133 a barrel, almost double the price last year. Europe's largest budget airline is largely un-hedged for fuel-price increases in the current financial year, which could see it make no profit.
Mr O'Leary said yesterday: 'The oil price is more likely to go up than down in the very short term. In the next 12-18 months, they may come back down below $100 a barrel.’ However, he stressed that this was just a ‘guess’ and his previous 'guess' that oil would by less than $80 now has proved spectacularly inaccurate.
Mr O'Leary said that some competitors would not be able to cope with persistent high fuel prices and may exit the market or be taken over by the dominant 3 European network airlines - Lufthansa, Air France KLM and BA. He said: ‘There is going to be an awful lot of airline bankruptcies in Europe. We will grow much faster in the next 12 months than we have in the past because other airlines will go bankrupt. There are more opportunities than we can actually cope with for growth next year.’
Ryanair's flight bookings for the next 3 months are currently about 2% higher than would be usual, he said, attributing this to the impact of fuel surcharges imposed by other 'high cost' airlines.
He added he was happy with the airline's Boeing 737-800 planes' performance but hoped high fuel costs would spur engine makers to design more fuel-efficient engines. ‘The 737 is fine. We need engines that burn less fuel. The best incentive for that is oil at $130 a barrel.'
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