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Ryanair boss Michael O’Leary believes competitors Wizz Air and easyJet will merge or be removed by other airlines as the aviation industry consolidates after the pandemic.
EasyJet Thursday unveiled it rejected a takeover approach from an unnamed suitor, which a person familiar with the conversations confirmed was Wizz Air.
The approach is the first sign of transactions in a European industry that has suffered 18 months of disruption and has long been considered ripe for consolidation.
‘Both easyJet and Wizz need to be either taken out or. . . “O’Leary told the Financial Times.
He suggests that large flag carriers such as the owner of British Airways, IAG, Lufthansa or Air France may eventually try to buy competing airlines, whether it is against low-cost competitors or smaller network airlines.
Consolidation must happen and will happen. It’s an inevitability, especially if you come from Covid, ‘he added.
O’Leary believes that airlines need a large scale to survive, and that the fragmented European market is unsustainable in the long run.
Many European governments were unwilling to lose their national airlines and – to the dismay of O’Leary – revealed great help in helping their struggling airlines to survive the impact of the pandemic.
Following the interest in its airline, Johan Lundgren, CEO of easyJet, also said that the pandemic could cause the industry’s band in Europe. ““I think everyone will agree that there is consolidation when you go through such situations,” he said on Thursday.
For O’Leary, a combination between Wizz and easyJet would make sense, as they both operate Airbus fleets and operate in largely separate areas.
A play for easyJet would have immediately given the ambitious Wizz a big foothold in Western Europe, an area in which it is moving slowly after growing through its home market in Eastern Europe over the past 15 years.
But, like Ryanair, it has built a formidable business model by keeping its own operating costs very low. A connection with easyJet entails higher costs and the need to manage from more expensive airports.
“The question is whether Wizz can improve the cost of easyJet, or the cost of easyJet will destroy the cost of Wizz,” O’Leary said.
Ryanair is not currently interested in M&A, O’Leary said, because he fears it would disrupt his airline’s terribly efficient business model.
Yet he reveals that he made several attempts to buy Wizz Air from US investor Bill Franke in the years before listing it in London in 2015. “I tried to buy from him three or four times, but we could never agree on a price,” he said.
He said he was no longer interested, given Wizz’s market capitalization of around £ 5.5 billion.
Ryanair has more than 200 aircraft to help it grow in the next decade, but is talking to Boeing this week about a further order for larger Max-10 aircraft that collapsed after the two parties could not agree on a price .
O’Leary, who is known in the industry for disclosing his dealings with suppliers, said he was ready to wait a decade for the next crisis before returning to the table. He said he would “like to play ball” with Airbus if it made an offer 5 to 10 percent cheaper than Boeing. “I’m an accountant,” he said.
Wizz Air and easyJet declined to comment.