By Andrew Atkinson
Ryanair CEO Michael O’Leary – whose budget airline company made €1.45billion profit in 2018 – says rival carrier Norwegian is doomed.
Norwegian became favoured in the European global aviation industry for long-haul low-cost (LHLC) model – cutting fares – in a highly competitive market.
Since Norwegian have reportedly switched its strategy from growth to profitability, cutting some long-haul routes, along with management reportedly having to seek additional funding, and a restructuring of debt.
On Norwegian’s business model not viable, O’Leary flagged up their recent action in the sale of five Boeing 737-800 aircraft, to a unit of China Aircraft Leasing Group Holdings Limited.
Norwegian said in a statement that the sale is in line with the company’s continued strategy of capitalising on the scale built up over the last few years and the changed focus from growth to profitability.
“They’re now resorting to selling the aircraft, to raise 50 million bucks, which wouldn’t pay the fuel bill for a week,” said O’Leary.
“Norwegian is doomed, the business model doesn’t work and they’re saddled now with enormous debts.
“It’s only a matter of time before it goes bust,” O’Leary, reportedly said.
O’Leary’s views arrive on the back of airlines, including Primera Air and Wow Air, as evidence that the model isn’t viable.
“We do not see LHLC as a threat to incumbents and do not expect the model to survive on its own on the trans-Atlantic market,” research notes from analysts Bernstein said, citing rising costs will lead to increased prices.
The researcher also reportedly claims that cost advantages enjoyed by the LHLC carriers, that enable low prices, are small.
Bernstein also predicts new midsize fuel-efficient aircraft could see the LHLC model successful – where it is easier to operate planes at full capacity – like in Asia.
Ryanair chief executive O’Leary could land a reported €99m (£88m) bonus, within five years.
O’Leary’s current pay and annual bonus will be halved – to a total maximum €1m a year.
O’Leary will have an option to buy 10m shares – at a fixed price of €11.12 a share.
If Ryanair, either record €2bn profit, in any one year by 2024, or should the share price rise above €21, the latter profit on O’Leary’s share options would be worth an estimated €99m.