Ryanair has warned that European airline ticket prices will rise next year as carriers seek to offset a sharp surge in jet fuel costs following the Middle East conflict.
The Irish airline said its own fuel bill is forecast to be €2 billion (£1.6 billion) higher in the short term. It expects European airlines to "materially" increase ticket prices as jet fuel costs stay elevated and existing fuel price hedges roll off.
The price of jet fuel has more than doubled over the past year to $196.70 per barrel due to the Middle East conflict. Ryanair chief executive Michael O'Leary warned that the cost pressure will affect carriers across the continent.
"Unless there is a swift resolution of the Middle East conflict, we expect jet fuel prices to remain elevated well into 2027," O'Leary said. "All EU airlines face a significantly higher fuel bill next year."
Jet fuel prices and Ryanair hedging
Ryanair has hedged 80 per cent of its fuel needs at $67 a barrel up to March 31. However, the remaining 20 per cent of its unhedged fuel requirement doubled in cost and contributed to a 10 per cent increase in costs over the six months to September 30.
Jet fuel is one of the largest single operating expenses for commercial airlines. Carriers routinely use financial hedging contracts to lock in fuel purchases at a fixed rate months in advance, shielding their finances from sudden spikes in global energy markets. When those contracts expire, airlines become exposed to prevailing market rates.
In the months after the war broke out, airlines including Ryanair cut fares to stimulate demand as customers held back from booking trips. Average fares at the carrier fell by 2 per cent year-on-year in the three months to the end of September.
Ryanair said its average fares are now trending "modestly ahead" of the same period a year earlier in the current quarter as passenger demand steadies.
Cost review and staff pay freezes
The Irish-based carrier said it plans to review its internal costs because higher airfares alone will not be enough to cover its soaring fuel bill. Based on current forward energy prices, Ryanair estimates a roughly €2 billion increase in its FY28 fuel bill.
"While we believe European short haul airfares will increase materially to reflect these much higher jet fuel prices and competitor capacity reductions, this is still unlikely to provide a full offset," O'Leary said.
Ryanair said its cost control measures may require temporary pay freezes, lower crew ratios on aircraft, and the increased use of artificial intelligence in back-office and support functions.
Market analysts noted that passengers could see higher fees for extras alongside rising base fares. Dan Coatsworth, head of markets at the British investment platform AJ Bell, said airlines face difficult choices as fuel costs climb.
"The natural response will be to jack up prices and to cut back on capacity, but that might not be enough to offset the extra costs," Coatsworth said. "It's possible that baggage charges go up, onboard food and drink costs increase, and airlines seek to operate with fewer staff and freeze the wages of those who do get shifts."
Second quarter profits and passenger growth
The warning on ticket prices came as Ryanair reported a 6 per cent drop in profits for the crucial second quarter, the peak summer period when the company typically makes most of its annual earnings. Profit fell to €1.61 billion, down from €1.72 billion over the same period last year.
Revenue over the quarter rose 4 per cent to €5.7 billion, up from €5.48 billion a year earlier. Passenger numbers grew by 5 per cent over the period to reach 64.5 million.
Ryanair is Europe's largest low-cost airline group by passenger traffic, operating short-haul routes across Europe. Under O'Leary, the carrier built its business model around high aircraft utilisation, tight cost discipline, and ancillary revenue from optional extras such as priority boarding and checked bags.
UK Air Passenger Duty and holiday taxes
Alongside rising fuel bills, O'Leary criticised British tax measures affecting the travel industry. He told The Telegraph that increases to Air Passenger Duty next April, introduced by former Chancellor Rachel Reeves, should have been halted at last week's Budget.
O'Leary also criticised a plan that will see mayors introduce a 5 per cent holiday tax on overnight stays, calling it a "mad proposal".
Air Passenger Duty is a UK excise duty charged on passengers flying from British airports, with rates determined by flight distance and cabin class. Budget airlines have long campaigned against increases to the levy, arguing that departure taxes raise the cost of travel and hurt demand on price-sensitive short-haul routes.
