Ryanair Warns of Rising Air Fares and Potential Airline Failures Due to High Oil Prices
Quick Look
Ryanair has lowered its annual passenger target to 214 million to mitigate high fuel costs, warning that European air fares will likely rise next year and that some less-hedged competitors may face bankruptcy if oil prices remain elevated.
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Why It Matters
Jet fuel prices have reached $140 a barrel, impacting airline operational costs. Brent crude prices have risen due to geopolitical tensions between the US and Iran.
Ryanair has warned that air fares in Europe will jump next year if the oil price remains high and that some airlines could go bust.
The Irish budget carrier has cut its passenger target for the year to 31 March, down from 216 million customers to 214 million, to help reduce its exposure to “unhedged winter oil” during the unprofitable off season, with jet fuel currently trading at $140 (£104) a barrel.
Ryanair expects passenger numbers between November and March to be broadly flat compared with the same period last year.
The company said: “If high oil prices continue through to summer 2027, Ryanair believes short-haul air fares in Europe will increase materially to reflect higher oil prices, as some less well-hedged competitors will struggle to maintain capacity or even survive this coming winter season.”
Brent crude, the global oil benchmark, touched $97.04 a barrel on Wednesday, the highest since late July, after renewed clashes between the US and Iran fuelled concerns over supply. It later eased back to just below $95.
Ryanair expects the cut to its winter schedule to reduce its winter losses by €70m (£60m) to €100m. But, because it has hedged 80% of its jet fuel at $67 a barrel, it expects to record another profitable year, albeit below last year’s record profit after tax.
The airline said it was on track to increase summer passenger numbers – between April and October – by more than 5% from 138 million to 145 million. Fares are drifting “modestly down” between August and September compared with last year, as flagged in July.
The rival budget airline Wizz Air reported on Wednesday that its passenger numbers had grown by 25.9% last month compared with a year earlier, driven by a jump in flight capacity.
Ryanair was forced to reassure travellers in July that its planes were safe after a passenger was saved from being sucked out of a window mid-flight. Ljubisa Karović was sucked out headfirst after an engine failure resulted in parts smashing an acrylic window during a flight from Thessaloniki in Greece to Memmingen near Munich in Germany.
Open Questions
- Will other major airlines follow with similar capacity cuts?
- How significant will the air fare increases be for consumers?
