European airfares could climb between 10% and 20% in 2027 as airlines lose the protection of existing fuel hedges, Ryanair chief executive Michael O'Leary told CNBC on Monday, November 2. He said higher oil costs would feed through to ticket prices, with the industry facing a substantial increase in fuel expenses next year.
Speaking to CNBC's Steve Sedgwick, O'Leary said customers had been shielded from the impact of higher fuel prices for the past 12 months. Those hedges are now expiring, he said, while the situation in the Middle East remains unresolved. He put the current price of jet oil at $170 a barrel and forecast significantly higher fares across Europe.
Ryanair reported a 15% decline in profit for the first half of its fiscal year, to 2.15 billion euros, or $2.3 billion. The fall came as the cost of the 20% of its jet fuel that was not covered by hedging arrangements doubled. The airline had secured the other 80% of its fuel for the year at $67 a barrel.
The carrier expects its fuel charges to increase by about 2 billion euros next year. It does not anticipate that higher short-haul ticket prices will cover that additional expense in full. Ryanair is consequently launching a review of costs, including reduced crew rations, a possible temporary freeze on pay and the use of artificial intelligence to improve efficiency.
The fuel pressures have also affected Ryanair's traffic plans. In September, the airline lowered its full-year passenger target from 216 million to 214 million to limit its exposure to unhedged fuel over the winter. It now expects passenger traffic from November through March to be broadly unchanged from the same period a year earlier.
O'Leary said Ryanair had cut winter capacity for the first time in many years. He said expanding capacity made no sense while the airline was purchasing unhedged oil at $170 a barrel.
Ryanair said its existing hedges had provided an advantage over competitors by protecting earnings from volatile oil prices. It has also hedged at least 25% of its jet fuel for 2028 at $95 a barrel.
The airline's Irish-listed shares rose slightly in early trading on Monday before reversing those gains and moving below their previous closing level. The stock has declined by more than 22% this year.
