European travelers could face higher airfares in 2027 as cheaper fuel contracts expire, with Ryanair CEO Michael O'Leary warning that fares could rise as much as 20%.
Here's what to know
O'Leary outlined the potential airfare increase in an interview with Euronews. Based on current forward prices, Ryanair projects 2 billion euros ($2.3 billion) in additional fuel spending during its financial year through March 2028.
The company has locked in prices through financial contracts covering 80% of its fuel requirements for the financial year through March 2027. Those arrangements have helped protect earnings, but fuel outside those contracts became twice as expensive.
Much higher fuel bills await European carriers, including Ryanair, when the cheaper fuel contracts expire ahead of the summer, O'Leary warned, per Euronews.
Both travelers' budgets and Ryanair's finances face a squeeze. The airline expects the additional expense to exceed what it can recover through higher fares and capacity reductions by competitors.
More background
The airline carried 125.8 million passengers from April to September, an increase of 6% compared with the same period a year earlier. Average fares, however, fell 4%.
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Its revenue rose 3% to €10.1 billion ($11.4 billion, while operating costs climbed 10% to €7.7 billion ($8.7 billion), according to Euronews. Net profit in the first six months of the financial year dropped 15% to €2.2 billion ($2.5 billion), and diluted earnings per share declined 14% to €2.05 ($2.30).
Passengers have been waiting longer to book flights, a shift Ryanair attributed to consumer hesitation caused by the war in the Middle East.
Later bookings are making the outlook less predictable despite what the airline described as strong demand for October through December and fares modestly higher than a year earlier, Euronews reported.
What's being done?
An expanded role for artificial intelligence in operational and support work is among Ryanair's cost-cutting options. The airline is also considering reducing crew numbers relative to passengers and temporarily freezing pay.
Alongside those potential cost cuts, the airline announced an €800 million ($901 million) share buyback program, directing money toward repurchasing shares while considering ways to limit workforce costs, the outlet noted.
Ryanair said the buyback would start in February and last roughly 10 months if market conditions allow.
"Unless there is a swift resolution of the Middle East conflict, we expect jet-fuel prices to remain elevated well into 2027," O'Leary told Euronews.
Where can I learn more?
Higher fuel costs are squeezing other airlines and ferry operators, too.
• Ryanair plans to skip fuel surcharges but expects rivals to impose them next summer.
• U.S. travelers could keep paying high airfares even if jet fuel prices fall.
• Massachusetts ferry riders could pay $17 more for cars as fuel costs jump 43%.
• The Danish Climate Council wants much higher aviation fees as flights from Denmark increase.
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