Why prices may jump
Michael O'Leary said the buffer from fuel hedging is thinning and higher oil costs are poised to flow into ticket prices. "So we're facing 2027 where we have much higher oil prices... I think they're going to get passed on in significantly higher airfares," he told CNBC on Monday.
He added that "The market customers have been insulated for the last 12 months... but those hedges are rolling off." With "no resolution in the Middle East" and jet oil "$170 a barrel," he called it "a very significant cost cliff we're all facing next year," and said fares across Europe could rise "next year" by 10%, "maybe even 20%."
The numbers and the plan
Profit for the first fiscal half dropped 15% to 2.15 billion euros as the price on the 20% of jet fuel that was not hedged doubled. The company said higher short haul fares are unlikely to fully offset an estimated 2 billion euro jump in fuel charges next year, so it is reviewing costs, including lowering crew rations, a possible temporary pay freeze, and using AI to drive more efficiencies.
Ryanair said it hedged 80% of this year's jet fuel at $67 per barrel, which it says gave it an edge as earnings were cushioned from oil swings. It also said at least 25% of its 2028 fuel is hedged at $95 per barrel. As of Sept. 30, cash stood at 2.6 billion euros after repaying 1.3 billion euros of debt.
O'Leary said, "You know we've paid off all of our debt this year, so we have effectively zero debt. We have 650 aircraft on the balance sheet. We're significantly cash positive."
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Capacity tweaks and market read
In September, the airline cut its full year traffic goal to 214 million passengers from 216 million to limit exposure to unhedged winter fuel, and it now expects November to March traffic to be broadly flat year over year. O'Leary said that even Ryanair trimmed winter capacity for the first time in years, adding it makes little sense to grow if it is "buying unhedged oil at $170 a barrel."
Ryanair's Irish listed shares were recently up 3.7%, though the stock is down around 19% this year. A live U.S. quote showed Ryanair Holdings PLC at $56.35, up $2.63 or 4.90%, Last | 11:02 AM EST.
What investors should watch
eToro analyst Adam Vetesse said the share reaction reflects positioning as much as results: "Investors appear to have already priced in the hit from unhedged fuel and softer summer fares, leaving room for relief that the quarter landed exactly where consensus had predicted." He added that in the short run, profits are largely dictated by oil prices and by last-minute booking trends, while the early bounce suggests investors are leaning on Ryanair's cost advantage.
The bottom line: higher fuel is pressuring margins even with expected fare increases, prompting cost cuts while liquidity stays solid and hedges offer partial protection.
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