Air travel costs across Europe could rise significantly in 2027, with potential fare increases of 10% to 20% anticipated as a result of surging fuel prices linked to the ongoing conflict in the Middle East. Michael O’Leary, the CEO of Ryanair, issued this warning during an interview with CNBC on Monday.
O’Leary’s comments came after Ryanair reported a 15% drop in profits for the first half of the year, despite an increase in passenger numbers. The airline indicated that it is facing heightened operating costs as existing fuel contracts approach expiration.
“I believe you’re going to see airfares rise next year across Europe by 10%, maybe even 20%,” O’Leary stated. This forecast is driven by escalating fuel expenses that airlines are struggling to absorb. Ryanair is expecting its annual fuel costs to increase by approximately €2 billion ($2.24 billion) for the financial year ending March 2028, based on current market trends.
Due to strategic fuel hedging, Ryanair has managed to secure around 80% of its fuel needs at a price of approximately $67 per barrel for the financial year ending in March 2027. However, the remaining 20% of fuel is exposed to the current market rates, which have surged to about $130 per barrel. Recently, jet fuel was trading even higher at around $170 a barrel.
The financial impact of these rising costs is already evident. The airline’s profit after tax fell to €2.15 billion ($2.41 billion) for the six months ending September 30, down from €2.54 billion ($2.84 billion) the previous year. While revenue increased by 3% to €10.08 billion ($11.29 billion), operating costs escalated by 10% to €7.69 billion ($8.61 billion).
Passenger traffic grew by 6%, reaching 125.8 million, but average fares decreased by 4% to €55.70 ($62.38). Ryanair also reported that customers are exhibiting hesitancy in booking travel, opting to secure flights closer to their departure dates due to uncertainties related to the conflict in the Middle East.
In response to these challenges, Ryanair has lowered its winter flight schedule and revised its full-year passenger target from 216 million to 214 million. O’Leary noted that expanding operations while facing rising fuel costs did not make financial sense, prompting the airline to review staffing and airport charges to mitigate future expenses.
Despite these pressures, Ryanair remains optimistic, projecting to carry over 220 million passengers in the next financial year, potentially aided by an expanding fleet. Additionally, the airline announced plans for an €800 million ($896 million) share buyback program starting in February 2027, along with an interim dividend of €0.273 ($0.31) per share.
The company refrained from providing a full-year profit forecast due to the ongoing volatility in fuel prices, the circumstances in the Middle East, and current booking patterns, which remain uncertain as the holiday season approaches.
