Small airlines face a brutal reckoning as oil prices surge, according to the CEO of Europe’s biggest budget carrier

The rising price of oil is likely to bring about the demise of numerous low cost airlines with tight profit margins, Michael O’Leary, the chief executive of Irish budget airline Ryanair, said.

Speaking to Bloomberg TV after his airline issued a profit warning for the first time in five years, O’Leary warned that a significant “shake out” is coming in the aviation sector as a result of oil’s huge surge over the past year or so.

“A lot depends on what happens with oil. We’re well hedged for the next 12 months out to March 2019,” O’Leary said.

“Spot prices close to $80 a barrel are going to lead to a significant shakeout in the industry as early as this winter,” he added.

“Some of those loss-making airlines who couldn’t make money when oil was at $40 a barrel certainly can’t survive this winter with oil at $80 a barrel.

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