Ryanair is winning the fuel crisis. It may not last
Ryanair entered the Iran war with 84% of its fuel hedged at $77 per barrel. Spot prices are now above $190. The competitive advantage is real. O'Leary's warning this week about May supply disruptions, however, suggests the crisis is moving into territory that no hedging contract reaches.
When jet fuel prices doubled in three weeks, Michael O'Leary had reason to be calm. Ryanair entered the Iran war with 84% of its current quarter's fuel locked in at $77 per barrel. Spot prices are now above $190. Every tonne of fuel Ryanair does not buy at spot rates is money its competitors are spending. At that scale of coverage, the crisis forcing SAS to cancel 1,000 flights and pushing United Airlines to warn of an $11 billion annual cost exposure is, for now, a competitive opportunity.
O'Leary issued a warning this week that complicates the picture. Ryanair will not hedge any new fuel contracts before the end of June, as the airline waits for prices to fall before locking in future costs — a rational decision given that nobody wants to commit to $190 jet fuel for 2027. The problem is that the unhedged 20% of Ryanair's current needs is being bought at precisely those prices. The existing hedges do not last forever.
The structure of the advantage
Ryanair's hedging position is the strongest among major European carriers. Lufthansa is at 82% for the current quarter and 77% for the remainder of 2026. IAG, which owns British Airways and Iberia, is covered at around 75% for the first quarter, falling to 50% by year-end. Air France-KLM starts the year at 70% and drops to 47% by the fourth quarter. At the bottom sits SAS, which entered 2026 with zero fuel hedging after adjusting its policy in 2025 due to uncertain market conditions.
The gap between those positions, measured in actual cost exposure, is significant. Using current fuel prices and reasonable assumptions about how the refining margin evolves through the year, the value of Ryanair's hedge position relative to an unhedged airline is substantial — and its lower fuel consumption per seat, roughly 37% below IAG, compounds the advantage further.
A structural problem runs beneath all of these numbers. Most airline hedging programmes are written against crude oil benchmarks, not against jet fuel itself. The Iran crisis has dramatically widened refining margins — the difference between crude oil costs and the price of refined fuel. In Asian markets, jet fuel was trading about $21 per barrel above crude before the conflict. After hostilities began, that margin surged to as high as $144 per barrel before settling around $65. A carrier hedged at 80% on crude is not 80% hedged against what it actually pays for fuel. Lufthansa's 77% hedge for 2026, for example, is based on a 45% hedge on gasoil prices and a 32% hedge on Brent — instruments that do not fully capture jet fuel exposure during a supply dislocation of this kind.
The supply problem O'Leary flagged
The more significant part of O'Leary's comments this week was not about hedging strategy. It was about supply. Ryanair has warned that if the conflict continues beyond April and the Strait of Hormuz remains compromised, fuel companies expect supply disruptions to begin in early May and persist through June — precisely when European airlines operate at maximum capacity and passenger demand is least elastic.
This is the scenario that no hedging contract addresses. The International Air Transport Association has warned that European jet fuel security is resting on a thin margin of commercial inventory. If the Strait of Hormuz remains effectively closed through April, no hedging contract or fare increase will matter if the fuel is simply not there.
For Ryanair, the timing is acutely uncomfortable. The airline's business model depends on high aircraft utilisation and thin margins amplified by volume. A summer in which jet fuel supply becomes physically constrained across European airports would hit a carrier operating hundreds of short-haul rotations daily more severely than a long-haul network carrier that can ground routes selectively.
The wider picture
The hedging gap between European and US carriers remains the defining financial divide in global aviation right now. Unlike their European rivals, US carriers do not hedge fuel at all. United CEO Scott Kirby said the airline was preparing for a scenario in which the Strait stays closed for three months, oil goes to $175, ends the year at $120, and ends 2027 at $100. It is a scenario, not a strategy.
The carriers that entered this crisis best protected are buying time, not immunity. Ryanair's advantage is real and significant in the short term. Whether it holds through a summer of potentially constrained supply is a different question — one that Delta's earnings on April 9 will do nothing to answer, focused as they will be on the US market's different dynamics.
The answer depends on one variable that no airline controls: when the Strait of Hormuz reopens, and what state the global jet fuel supply chain is in when it does.
