Ryanair braces for €2bn fuel cost shock as O'Leary faces scrutiny over pay and productivity drive
Ryanair has warned that soaring fuel costs could add around €2bn to its annual fuel bill next year, prompting the carrier to review labour, airport and productivity costs even as it remains Europe's most profitable airline.
The warning came as the group reported first-half FY27 profit after tax of €2.15bn, down 15% year-on-year, despite carrying a record 125.8 million passengers, up 6% from the previous year. Revenue rose 3% to €10.08bn, but operating costs increased 10%, driven largely by sharply higher fuel prices and lower average fares.
According to Michael O'Leary, the airline's chief executive, the price of Ryanair's unhedged fuel almost doubled during the period, while average fares fell 4% as consumers booked later and remained cautious amid geopolitical uncertainty in the Middle East.
Despite the earnings decline, Ryanair's load factor remained unchanged at 95%, while ancillary revenues increased 6% to €3.08bn, underlining the continued strength of demand for low-cost travel across Europe.
The more significant development for the industry may lie in Ryanair's outlook for FY28.
The airline believes that, unless fuel markets ease substantially, European carriers could face dramatically higher fuel costs as historic hedges expire. Ryanair estimates its own fuel bill could increase by approximately €2bn based on current forward prices.
To mitigate the impact, the carrier has begun reviewing costs across the business. Measures under consideration include labour agreements that "may require temporary pay freezes" as well as the increased use of AI for route planning and development.
The earnings announcement also arrives against a backdrop of heightened investor scrutiny of O'Leary's remuneration.
In September, nearly 40% of Ryanair shareholders voted against a new long-term incentive package that could ultimately deliver a payout worth at least €150m if demanding performance targets are achieved. However, more than 98% of shareholders supported O'Leary's reappointment as chief executive.
The carrier expects European short-haul capacity to remain restricted due to aircraft production delays, engine supply issues and ongoing industry consolidation. The airline plans to grow passenger traffic to more than 220 million next year following the expected arrival of its first Boeing MAX 10 aircraft.
O'Leary argued that Ryanair's fuel hedging programme, strong balance sheet and lower operating costs leave it better positioned than many rivals to withstand a period of elevated fuel prices. The group currently has 80% of its FY27 fuel requirements hedged at approximately $67 per barrel and has already begun extending coverage into FY28.
