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Ryanair’s boss Michael O’Leary believes that with the integration of the aviation industry after the pandemic, rivals Wizz Air and EasyJet will need to merge or be acquired by other airlines.
Easyjet Announced on Thursday It rejected the acquisition method of an unnamed suitor, and a person familiar with the negotiations confirmed that it was Wizz Air.
This approach is the first sign of a deal for the European industry, which has experienced an 18-month disruption and has long been seen as an opportunity for consolidation.
“EasyJet and Wizz either need to be eliminated, or… come together,” O’Leary told the Financial Times.
He suggested that the owners of British Airways, such as IAG, Lufthansa or Air France, may eventually try to acquire rival airlines, whether they are low-cost competitors or smaller network airlines.
“Integration needs to happen and will happen. This is inevitable, especially from Covid,” he added.
O’Leary believes that airlines need a huge scale to survive. In the long run, the fragmented European market is unsustainable.
Many European governments are reluctant to lose their national airlines, and-to O’Leary’s fear-announced comprehensive assistance to help troubled airlines survive the effects of the pandemic.
Following his interest in its airlines, easyJet CEO Johan Lundgren also stated that the epidemic may promote industry cooperation in Europe. “I think everyone will agree that when you go through a situation like this, there will be integration behavior,” he said on Thursday.
For O’Leary, the combination between Wizz and easyJet makes sense because they both operate an all-air passenger fleet and work in largely different regions.
The cooperation with easyJet will enable the ambitious Wizz to immediately show its skills in Western Europe, and after achieving growth in the Eastern European home market over the past 15 years, the company is slowly entering the region.
However, like Ryanair, it has established a strong operating model by keeping its operating costs at a very low level. The cooperation with EasyJet will bring higher costs and the need to operate from more expensive airports.
“The question is, will Wizz increase the cost of easyJet, or whether the cost of easyJet will undermine Wizz’s cost base,” O’Leary said.
O’Leary said that Ryanair is currently not interested in mergers and acquisitions because he is worried that it will undermine the extremely efficient business model of its airlines.
Nevertheless, he revealed that in the years before Wizz Air went public in London in 2015, he had repeatedly tried to acquire Wizz Air from its founding US investor Bil Price,” he said.
He said that given Wizz’s market value of approximately £5.5 billion, he is no longer interested.
Ryanair ordered more than 200 aircraft to help it achieve growth in the next ten years, but this week it negotiated with Boeing on a further order for a larger Max-10 aircraft because the two sides failed to reach an agreement on the price.
O’Leary is known in the industry for openly negotiating with suppliers. He stated that he is prepared to wait ten years before the next crisis before returning to the negotiating table. He said that if Airbus’ offer was 5% to 10% cheaper than Boeing, he would “be happy to play with it.” “I am an accountant,” he said.
Wizz Air and easyJet declined to comment.