Ryanair CEO Predicts Up to 20% Fare Increase in 2027 Amid Rising Fuel Costs

Michael O'Leary, the CEO of Ryanair, has sounded the alarm over a potential surge in European airline ticket prices next year. Speaking to CNBC on Monday, O'Leary forecasted that airfares could climb as much as 20% in 2027. This projection comes as Ryanair faces a sharp increase in its fuel expenses, largely due to the expiration of fuel hedges and sharply higher oil prices.

During the first half of Ryanair's fiscal year, the company reported a 15% decline in profits, down to 2.15 billion euros (approximately 2.3 billion US dollars). A significant factor behind this drop was the doubling of the cost for the 20% of jet fuel that Ryanair did not hedge. O'Leary emphasized that while customers have been somewhat shielded from rising fuel costs over the past year, the protection offered by fuel hedges is ending. This exposure could translate into higher ticket prices.

"We are facing 2027 with substantially higher oil prices," O'Leary stated. "Jet fuel prices are currently around $170 a barrel, a considerable jump. Given this, I expect airfares across Europe to rise by 10% to possibly 20%." He also highlighted ongoing instability in the Middle East as a factor contributing to elevated fuel costs.

Despite these challenges, Ryanair is not planning to raise short-haul fares enough to fully cover the expected 2 billion euro increase in fuel costs next year. To manage expenses, the airline intends to undertake a thorough cost review. Measures under consideration include reducing crew meal expenses, imposing a temporary pay freeze, and employing artificial intelligence technologies to improve operational efficiency.

Ryanair's stock initially saw a slight uptick in early trading on Monday but later declined below its previous closing price. The airline’s shares have dropped more than 22% so far this year amid market concerns over rising costs and declining profit margins.

In September, Ryanair adjusted its full-year passenger target downward, from 216 million to 214 million, in an effort to limit exposure to unhedged fuel costs during the upcoming winter period. The airline now anticipates winter traffic from November through March to remain roughly flat compared to the previous year.

O'Leary remarked on the unusual decision to cut winter capacity, explaining that it does not make financial sense to expand when fuel prices are so high and largely unhedged. "This winter, airlines across Europe, including Ryanair, will keep capacity flat due to the cost of unhedged oil at $170 per barrel," he said.

Ryanair has hedged 80% of its jet fuel for the current year at a price of $67 per barrel, which has helped shield its earnings from volatile fuel prices. For 2028, the company has secured hedges for at least 25% of its fuel needs at around $95 per barrel, attempting to mitigate future exposure.

Market analyst Adam Vetesse from eToro noted that the stock’s reaction reflects investor expectations more than the raw financial figures. He observed that markets had likely priced in the impact of unhedged fuel costs and softer summer fares. Vetesse suggested that investors might be willing to trust Ryanair’s cost advantages will offset the fuel price pressures after the current difficulties.

Ryanair also reported holding 2.6 billion euros in cash as of September 30, after repaying 1.3 billion euros of debt. O'Leary pointed out that the airline is effectively debt-free, with a fleet of 650 aircraft listed on its balance sheet and significant cash reserves. He contrasted this with competitors who are resorting to sale and leaseback deals to raise cash, which he described as risky financial strategies.

Overall, Ryanair’s outlook for 2027 is shaped by the challenge of managing fuel price volatility amid geopolitical uncertainties. The airline’s cautious capacity planning and efforts to control costs underscore the pressures facing the sector as energy expenses remain high. This situation highlights the delicate balancing act airlines must perform between maintaining competitive fares and absorbing rising operational costs in a fluctuating market environment.