Oil price surge will ground struggling airlines, warns Ryanair boss

Ryanair boss warned that some underperforming airlines will struggle with oil price surge. Photo / Getty Images

Ryanair boss Michael O'Leary warned today that some underperforming airlines will go to the wall over the coming winter as soaring oil prices take a chunk out of their margins.

The outspoken chief executive said that, while his airline would be protected by its fuel hedging scheme, higher oil prices would push up costs across the industry, leading to a "shakeout" of his struggling competitors, according to the Daily Telegraph.

"Some of those loss-making airlines who couldn't make money when oil was at US$40 ($57.57) a barrel, certainly can't survive this winter with oil at US$80 per barrel," O'Leary told Bloomberg.

He was speaking after Ryanair unveiled a bumper set of annual results, with soaring revenues and profits that came despite pilot shortages that forced the no-frills carrier to cancel 20,000 flights last autumn.

The airline had to cope with a rise in costs excluding fuel, as it was forced to hand out compensation to passengers affected by the cancellations and increase wages after cutting a new deal with pilots.

Meanwhile fares fell 3 per cent amid fierce competition as the total number of available seats grew across Europe.

But Ryanair still managed to grow pre-tax profits in the 12 months to March by 10 per cent to €1.3 billion ($2.2b) thanks to a boom in passenger numbers that pushed up sales 8 per cent.

Sales were boosted by a 13 per cent surge in so-called "ancillary" revenues such as luggage fees, reserved seats and car hire, which now account for around one third of the carrier's top line.

O'Leary warned that costs were likely to rise 9pc this year as Ryanair contends with a higher wage bill and the soaring price of oil, which the airline expects to add €400 million to its fuel bill.

A fierce critic of Britain's decision to leave the European Union, O'Leary also cautioned that UK shareholders in Ryanair could find their voting rights restricted in the event of a hard Brexit to comply with rules that dictate EU airlines should be majority owned by investors within the bloc.

Ryanair is currently awaiting approval from EU regulators for its purchase of a 75 per cent stake in LaudaMotion, the low-cost Austrian airline backed by former Formula 1 star Niki Lauda.

Shares in Ryanair were up 3.5 per cent at €16.04 in early trade.