Ryanair’s CEO Michael O’Leary warned that the era of ultra-low-cost European flights could end if oil prices remain above $100 per barrel into next year. The airline had hedged most of its fuel needs through March 2027, insulating it from rising costs so far, but escalating tensions between the U.S. and Iran have pushed oil prices beyond $100, threatening fare increases, O’Leary said on Thursday, according to fortune.com.
Ryanair’s fuel-hedging strategy, which locks in fuel prices in advance, has historically allowed the airline to maintain rock-bottom ticket prices even during crises like the Great Financial Crisis and the Covid-19 pandemic. However, the current geopolitical conflict in the Middle East has caused a surge in jet fuel prices. O’Leary told reporters that if oil prices stay elevated, Ryanair expects a significant uplift in airfares, though the company hopes to avoid passing on the full cost to customers, per fortune.com.
The warning highlights the vulnerability of the low-cost airline sector to volatile energy markets. Ryanair’s no-frills business model, inspired by Southwest Airlines, has kept fares low for over 30 years by charging only for the seat and excluding extras like food and drinks. With oil prices at historic highs, Ryanair faces pressure similar to other European carriers, which may need to raise fares to offset soaring fuel expenses, according to fortune.com.
Ryanair’s annual report released in June confirmed its fuel-hedging program covers most of its estimated fuel needs through March 2027. The airline’s next financial update is expected in the coming months, when investors will assess how sustained high oil prices affect its cost structure and pricing strategy, fortune.com reported.