Ryanair has announced that it expects flight prices this summer to remain 'broadly flat' compared to last year, as the airline expresses 'near-zero concerns' over jet fuel shortages despite ongoing tensions in the Middle East. However, the budget carrier cautioned that holidaymakers booking later in the year could face higher fares.
Fuel Supply and Pricing Outlook
Michael O'Leary, Ryanair's chief executive, stated that Europe has secured ample alternative sources of jet fuel, alleviating earlier worries about supply disruptions linked to the Iran war. 'There was a real concern in Europe two months ago. We now have almost zero concerns over fuel supplies in Europe. The challenge remains price,' he said.
The travel industry has been impacted by restrictions on shipping through the Strait of Hormuz, but Ryanair noted that Europe is well stocked with fuel from shipments originating in West Africa, Norway, and the Americas. While the airline has hedged 80% of its jet fuel requirements until April 2027 at approximately $67 per barrel, it acknowledged that unit costs could rise by about 5% if fuel prices remain elevated.
Potential for Airline Casualties
O'Leary expressed confidence that the Iran conflict would not persist or keep the Strait of Hormuz closed through next year. However, he warned that a prolonged conflict could lead to bankruptcies among airlines with lower hedging levels. 'If it does continue over those 12 months, there will be airline casualties in Europe this winter,' he said.
Neil Sorahan, Ryanair's chief financial officer, added that he is 'increasingly confident that we will not see any supply shocks this summer.'
Fare Trends and Consumer Behavior
Ryanair reported that fares have declined in recent weeks due to uncertainty surrounding the Middle East conflict, with prices expected to fall by a 'mid-single digit percentage' in the quarter ending June. The company revised its summer fare outlook, now anticipating prices to be 'broadly flat' compared to last summer, after previously forecasting a modest increase during the peak travel season.
'Demand is still strong, but people are leaving it longer to book, so we do not have the visibility that we normally have for July to September,' Sorahan explained. 'Closer-in bookings are strong, but if people leave it late, they could take on higher fares.'
Holidaymakers are increasingly delaying their summer trip bookings and showing greater interest in domestic travel, a trend attributed to persistent consumer uncertainty.
Market Fragility and Consumer Spending
Dan Coatsworth, head of markets at AJ Bell, commented that the market is 'too fragile' to raise fares in response to rising costs, as higher inflation continues to squeeze consumer spending. 'Airlines and holiday companies are having to drop prices, or at best keep them level, just to keep demand ticking over,' he said.
Financial Performance and Future Guidance
Ryanair reported a record profit after tax of €2.26 billion (£2 billion) for its financial year ending in March. However, the company suspended guidance for its 2027 financial year, citing that it is 'far too early' to provide forecasts due to potential increases in fuel, environmental taxes, and wage bills.
The airline also flagged that its environmental taxes in the European Union are expected to rise by €300 million this year to approximately €1.4 billion, 'which makes EU air travel even less competitive.'
CEO Contract Extension
Ryanair is in negotiations with O'Leary regarding an extension of his contract beyond 2028 to 2032. Under the proposed terms, O'Leary would be able to purchase 10 million shares at the market price before the Iran war, but only if 'very ambitious profit after tax or share price growth targets are achieved.' O'Leary has served as CEO since 1994. Sorahan confirmed that details of the new contract would be finalized in the coming weeks.
