During an interview with CNBC, Ryanair CEO Michael O'Leary announced that European airfares are projected to rise significantly, potentially by 10% to 20% in 2027, as the airline faces a substantial increase in fuel costs following the expiration of fuel hedges.
Ryanair's profit for the first half of the fiscal year fell by 15% to 2.15 billion euros ($2.3 billion), primarily due to the doubling of unhedged jet fuel prices, which are currently at $170 per barrel. O'Leary emphasized that the airline has been insulated from these costs for the past year but will now have to pass on these expenses to customers.
In response to the anticipated 2-billion-euro increase in fuel charges, Ryanair is initiating a cost review that may include reducing crew rations, a temporary pay freeze, and leveraging AI for efficiency. Despite a slight initial rise in share prices, Ryanair's stock has declined over 22% this year, reflecting investor concerns about the impact of unhedged fuel costs and reduced traffic targets.
The airline has adjusted its full-year traffic forecast down from 216 million to 214 million passengers and plans to maintain flat winter traffic year-on-year. O'Leary noted that Ryanair has hedged 80% of its jet fuel at $67 per barrel for the year, providing a competitive edge over rivals.
However, he warned that earnings remain vulnerable to oil price volatility and that many competitors are resorting to risky financial strategies to manage cash flow. Ryanair's financial position remains strong, with 2.6 billion euros in cash and zero debt after repaying 1.3 billion euros this year