Ryanair CEO Michael O’Leary warned that airfares across Europe could rise significantly in 2027 as airlines face higher fuel costs when existing hedges expire. Speaking to CNBC, O’Leary said fares could increase by between 10% and 20% next year.
The warning comes after Ryanair reported a 15% fall in profit to €2.15 billion ($2.3 billion) during the first fiscal half of the year. The airline said the cost of the 20% of its jet fuel that was not hedged had doubled.
O’Leary said current fuel prices represented a major cost challenge for airlines, noting that customers had been protected from much of the volatility over the past 12 months by existing hedging arrangements. He added that those protections were now expiring and that higher costs were likely to be passed on through fares.
Ryanair expects its fuel bill to increase by around €2 billion next year, but said higher short-haul fares would not fully compensate for the increase. The airline is starting a cost review that could include reducing crew rations, a temporary pay freeze and greater use of artificial intelligence to improve efficiency.
The carrier has also reduced its full-year traffic target from 216 million to 214 million passengers to limit exposure to unhedged fuel during the winter. Winter traffic between November and March is expected to remain broadly unchanged from the previous year, following a reduction in capacity.
Ryanair said it had hedged 80% of its jet fuel for the year at $67 per barrel, helping shield its earnings from oil-price volatility. It has also hedged at least 25% of its 2028 fuel requirements at $95 per barrel. The airline’s Irish-listed shares fell below the flatline in Monday trading and have declined by more than 22% this year.
Sources: CNBC Markets.