ryanair Chief Executive Officer Michael O’Leary told CNBC on Monday that European airfares will rise “significantly” and could rise by up to 20% next year as fuel hedges expire.
The low-cost airline’s profits fell 15% to 2.15 billion euros ($2.3 billion) in the first half as unhedged jet fuel prices doubled.
“So we’re going to be in 2027 where oil prices are going to be significantly higher…and that price is going to be passed on to significantly higher airfares,” O’Leary told CNBC’s Steve Sedgwick on Monday.
“For the past 12 months, customers in the market have been isolated…but that hedge is crumbling. There is still no resolution in sight for the Middle East. Jet oil today is $170 a barrel. So this is a very significant cost cliff that we will all face next year. I believe airfares will rise by 10%, maybe even 20%, across Europe next year,” O’Leary added.
Ryanair said it did not expect short-haul fare increases to fully offset next year’s estimated €2 billion increase in fuel costs. As a result, the company has embarked on a cost review, including reducing crew rations, potentially temporarily freezing pay, and using AI to drive greater efficiency.
Ryanair’s Irish-listed shares initially rose modestly in early trading on Monday, but have since smoothed out the gains to trade below the flatline. The stock price has fallen more than 22% this year.
Ryanair stock since the beginning of the year.
In September, the airline announced it was lowering its full-year passenger traffic target from 216 million to 214 million to reduce its exposure to unhedged winter fuel. Currently, winter traffic volume from November to March is expected to remain roughly the same as last year.
“Even this winter, I think we’re seeing airlines across Europe, including Ryanair, reduce their winter flight numbers for the first time in many years,” Mr O’Leary said. This winter will likely remain flat compared to last year, as it doesn’t make sense to expand capacity if you’re buying unhedged oil at $170 a barrel. ”
Ryanair hedges 80% of its annual jet fuel production at $67 a barrel, which the company said gives it an advantage over competitors because it insulates its revenue from volatile oil prices. The company added that it is hedging at least 25% of 2028 jet fuel prices at $95 per barrel.
