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Home / Business / Budget airline Norwegian is doomed, claims Ryanair & # 39; s Michael O & # 39; Leary

Budget airline Norwegian is doomed, claims Ryanair & # 39; s Michael O & # 39; Leary



Ryanair CEO Michael O. Leary said rival airline Norwegian will be broken sooner or later, claiming the company is "doomed."

Never one to chop his words, O & # 39; Leary told CNBC Monday that rival budget European airline Norwegian was being saluted "with enormous debt."

"We are seeing the growth of four or five major airlines across Europe, and Ryanair is by far the largest in number of passengers, and you have seen in our numbers this morning that we have delivered 11% traffic growth … on the back of 5 % lower airfares, "he told CNBC's" Squawk Box Europe. "

" We are continually throwing costs, Ryanair is continuing the low prices, and that's what is driving our growth, and that's accelerating the death of airlines. such as Thomas Cook, (the French budget airline) Aigle Azur and Norwegian, which I think will not be far behind them. "

Asked if he thinks Norwegian should go, O & # 39; Leary referred to Norwegians' decision to sell aircraft in year.

"They now dare to sell the planes to raise $ 50 million, which would not pay the fuel bill for a week. Norwegian is doomed, business model is not working, and they are salty with huge debt now. It's just a matter of about time before it passes. "

A Norwegian spokesman, known formally as the Norwegian Air Shuttle, was not immediately available when contacted by CNBC.

A Boeing Co. 737 passenger aircraft operated by Norwegian Air Shuttle ASA

Simon Dawson | Bloomberg | Getty Images

Norwegian in numbers

In October, Norwegian announced that it would sell five of the Boeing 737-800 aircraft to a unit of China Aircraft Leasing Group Holdings Limited, Reuters reported. The company said in a statement that the transaction "is expected to increase the company's liquidity by approximately $ 50 million after repayment of debt and have a positive equity effect."

"Sales are in line with the company's continued strategy to leverage the scale built up over the past few years and the shifting focus from growth to profitability," it states.

Rapid expansion of the budget company (which began operating as a low-cost carrier with Boeing 737 aircraft in 2002 and operating both routes and short-haul routes) left the company with high debt and losses that have caused it to announce recent measures to cut costs .

It reported a loss of $ 1.45 billion ($ 159 million) in its 2018 results released in February, saying it had been "heavily impacted by engine problems, loss of fuel hedges and tough competition in a period of strong growth. "

It added that "the main priority going back to profitability through a number of measures, including a comprehensive cost reduction program, an optimized route portfolio and sales of aircraft."

It delivered better results than expected in the third quarter of October with net profits. of NOK 1.67 billion, 28% higher than the same quarter last year. It also signaled that, to date, the net debt amounted to NOK 62 billion.

One expert told CNBC that O & # 39; Leary's comments on Monday were not unjustified. Daniel Roeska, a Bernstein senior analyst covering the European transport sector, told CNBC that "the current efforts in Norwegian provide some relief and will help the airline survive this winter. But there is still a significant risk."

"The difficulty is around the time. Airlines can survive on smoke for a long time," he said. "So in general: yes, they are likely to go bankrupt – but not in the next few months I would say," he said, adding that there was a possibility that the airline could be bought.

Ryanair released half of the year's earnings, spanning six months from April to the end of September for the company, on Monday reporting a net profit of EUR 1.15 billion ($ 1.28 billion) over a study of analysts.

It said that the outlook for the rest of the year was cautious, but reduced its annual profit for the year to 800-900 million euros (from a previous forecast of 750-950 million euros). It said net debt stood at EUR 460 million at the end of the period.


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