O'Leary says European fares could rise up to 20% next year
Ryanair's Michael O'Leary says European fares could rise up to 20 per cent in the next 12 months, the biggest increase in history, because most airlines are largely unhedged against oil prices. He doubts the rise will cover fuel bills.
Michael O'Leary, chief executive of Ryanair, said that European airfares could rise by up to 20 per cent over the next 12 months. "You're going to see the biggest increase in airfares, I would say in history, in Europe in the next 12 months," he told a press conference in Brussels.
He added that he did not think the increase would be enough to cover "the dramatically higher oil bills" facing the industry.
The reason is hedging. O'Leary said Ryanair is "85 per cent unhedged next year, and most of the other European airlines are in a similar position."
That figure refers to Ryanair's next financial year, which begins in April 2027. The airline said in July that it had hedged 80 per cent of its fuel for the current year at $67 a barrel, but only 15 per cent of the following year, at about $85.
The protection that has cushioned Ryanair through the oil shock caused by the Middle East war, which began in late February, therefore runs out in the spring. From then, Ryanair will pay close to the market price, as most of its rivals already do.
The forecast marks a reversal. Ryanair's average fares fell 6 per cent in the three months to June, profit after tax fell 34 per cent, and the airline said in July that fares in the following quarter were trending down by a low to mid single digit percentage.
O'Leary said capacity was also falling as weaker airlines struggled, and that higher taxes were adding to costs. Ryanair will reduce its presence in France and Belgium, two countries whose regulation he criticised.
Ryanair has more room to grow than most, if Boeing delivers. O'Leary said he expects the first of the airline's 737 Max 10s, which the US Federal Aviation Administration certified on the same day, in January and about 16 more by April.
That combination of more seats and higher fares is the outcome investors will want to see. Ryanair's shares have fallen 25 per cent this year and dropped as much as 2.1 per cent on Tuesday.
A forecast from the chief executive of Europe's largest airline by passengers also tells competitors where he expects prices to go. Whether rivals follow will depend on how many have the cash to keep adding seats while fuel stays high.
What to watch: Ryanair's half-year results in November, where O'Leary may put figures on winter and summer fares, and any hedging updates from easyJet, Wizz Air and Jet2.
