Ryanair boss Michael O'Leary told reporters Tuesday that Europe is staring at "the biggest increase in airfares, I would say, in history in Europe in the next 12 months." He tied the pressure to costlier oil linked to the Middle East war and said carriers are pushing more of the fuel tab into ticket prices.
He put the potential rise at up to 20 percent over the next year. Even so, he added, "will that increase in airfares be enough to cover the dramatically higher oil bills? I don't think it will," flagging margin strain because higher fuel add-ons are unlikely to fully offset the oil spike.
O'Leary said Ryanair is 85 percent unhedged on fuel next year and noted that many European peers are positioned much the same. He also pointed to tighter capacity as some airlines struggle, with higher taxes further clouding the outlook even as travelers keep spending on flights.
He used an expletive-laden press conference to attack rules in France and Belgium, where Ryanair will scale back due to higher taxes. He reiterated that European aviation will keep consolidating as weaker players try to survive in a high-cost environment.
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He said airlines worldwide saw jet-fuel costs surge following the start of the Iran war in late February. Ryanair's July earnings showed the conflict hurt profit and pushed bookings later as concerns about jet-fuel supply cropped up.
O'Leary also cited continuing upheaval: Air Baltic and Spain's Volotea are restructuring to cope with higher costs; last week, Deutsche Lufthansa topped Air France-KLM while seeking to buy a portion of TAP, Portugal's state-owned airline; and Apollo Global Management Inc., a US private equity firm, has been mapping out a takeover plan for EasyJet Plc.
On fleet plans, he said Ryanair aims to take delivery of its first Boeing Max 10 in January and anticipates roughly 16 additional jets arriving by April.
Higher fuel, scant hedging, and added taxes make for tougher earnings math even if demand holds up. With Ryanair down 25 percent this year after Tuesday's 2.1 percent intraday dip, the line to watch is whether airlines' pricing power can outrun their oil bill.
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