Ryanair carried more passengers this summer, but made less money doing it. In the six months leading up to September, average fares declined and the price of fuel the company bought outside its existing price-protection contracts doubled.
The pressure could intensify next year. Most of Ryanair’s fuel remains protected until March 2027, but only a quarter of its requirements for the following financial year are covered. Based on forward prices cited on 2 November, the airline estimates its annual fuel bill could rise by €2bn — about £1.7bn.
“As low cost oil hedges roll off ahead of summer 2027, all EU airlines face a significantly higher fuel bill next year,” chief executive Michael O’Leary said while delivering Ryanair’s November results. For passengers planning next summer’s travel, the price of a ticket may depend partly on agreements signed long before they start looking for flights.
When the fuel bargains run out
Airlines use fuel hedging to agree on prices in advance or protect themselves against sudden increases. It makes their costs more predictable, but that protection eventually expires.
Some carriers are better prepared than others. Lufthansa has secured most of its passenger airlines’ expected fuel requirements for 2027, while Air France-KLM has covered just over half. Ryanair’s figures cover a different financial period, making direct comparisons difficult.
For Wizz Air, higher prices could work in its favour. The low-cost carrier has hedged half its fuel for summer 2027, giving it some protection against further increases.
“If this conflict in the Middle East keeps going on for another year, I’m going to be gaining a huge competitive advantage,” chief executive József Váradi told Aviation Week in October.
That could matter on routes where budget airlines compete directly. A carrier paying less for fuel has more room to discount tickets without sacrificing as much profit. But lower market prices would change the calculation: airlines locked into expensive contracts could end up paying more than competitors buying at prevailing rates.
Fares can only go so far
Airlines must decide how much of the higher bill to pass on to passengers. Raising fares may help recover costs, but charging too much risks losing customers.
Air France-KLM has raised ticket surcharges and kept recruitment for non-operational roles on hold. Stronger revenue has nevertheless helped it increase operating profit despite higher fuel costs. Lufthansa has benefited from its profitable cargo and aircraft maintenance businesses, providing additional earnings while its passenger operations face higher expenses.
KLM is also reorganising work linked to about 5,000 positions through transfers, outsourcing and productivity measures.
“The environment we operate in is becoming increasingly complex, with global instability, high fuel prices, and growing pressure on the aviation industry,” chief executive Marjan Rintel said in KLM’s restructuring announcement. The changes also reflect wider problems with KLM’s costs and operations.
Ryanair, meanwhile, is considering temporary pay freezes and has trimmed its winter schedule to reduce exposure to fuel bought without earlier price protection. It still plans to carry more passengers next summer.
“While air fares are rising, airlines are still absorbing part of the hike in their bottom lines,” director general Willie Walsh of the International Air Transport Association said in its June financial outlook.
As fuel costs rise, competition between airlines may depend more on who secured the cheaper deals and how long those deals last.
Ryanair carried more passengers this summer, but made less money doing it. In the six months leading up to September, average fares declined and the price of fuel the company bought outside its existing price-protection contracts doubled.
The pressure could intensify next year. Most of Ryanair's fuel remains protected until March 2027, but only a quarter of its requirements for the following financial year are covered. Based on forward prices cited on 2 November, the airline estimates its annual fuel bill could rise by €2bn — about £1.7bn.
“As low cost oil hedges roll off ahead of summer 2027, all EU airlines face a significantly higher fuel bill next year,” chief executive Michael O'Leary said while delivering Ryanair's November results. For passengers planning next summer's travel, the price of a ticket may depend partly on agreements signed long before they start looking for flights.
