Ryanair profit drops 34% as Iran war doubles jet fuel costs, summer fares to fall

Profit miss and fare cuts

Ryanair reported an after-tax profit of €538 million for its fiscal first quarter, the three months through June, a 34% decline from the same period a year earlier. The result fell short of the €579 million consensus forecast from a company-compiled analyst poll. The Irish low-cost carrier said it had cut average fares by 6% year-on-year to stimulate demand, as the war in the Middle East made consumers hesitant to book, raised fears of EU jet-fuel shortages, and pushed bookings closer to departure dates. Total revenue edged up just 1% to €4.38 billion, while revenue per passenger dropped 5%.

The Middle East conflict led to consumer hesitancy, concerns about EU jet-fuel shortages, economic uncertainty and later bookings.

Fuel costs and hedging

The unhedged portion of Ryanair's jet fuel needs, about 20% of its requirements, more than doubled in price during the quarter, with jet fuel reaching $150 per barrel. Operating costs rose 11%, with different reports placing the total between €3.42 billion and €3.81 billion. Ryanair has hedged 80% of its fuel for the current fiscal year at roughly $67 per barrel, a position CEO Michael O'Leary said protects profits and widens the airline's advantage over EU competitors. The company has also begun hedging for fiscal 2028, covering 15% of consumption at about $85 per barrel.

Ryanair's conservative fuel policy, with 80% of fiscal 2027 covered at approximately $67 per barrel, protects the group's profits and extends its advantage over other EU competitors.

Passenger volumes and revenue

Despite the fare reductions, Ryanair carried 61.3 million passengers in the quarter, a 6% increase. The airline maintained its full-year passenger target of 216 million, implying 4% growth. However, the later booking pattern reduced visibility, and the company said it had "zero second half visibility" for the financial year.

Summer outlook and risks

Ryanair expects fares in the July-September quarter to be modestly lower than last year, a shift from May when it had forecast broadly flat summer pricing. The outcome depends heavily on close-in bookings in August and September. The airline withdrew its full-year profit guidance, citing high sensitivity to conflict escalation in the Middle East and Ukraine, unhedged fuel prices, macroeconomic shocks, and European air traffic control strikes. An interim US-Iran peace deal in June briefly eased oil prices, but fighting resumed in early July and intensified over the weekend before the results, pushing Brent crude above $90 a barrel and halting traffic through the Strait of Hormuz.

The longer the strait remains closed and the war escalates, the greater the risk that oil prices will have to rise to around $150 a barrel to bring demand down to match the hit to supply.

Market reaction

Ryanair shares fell 7.2% on July 20, leading a broader decline in European airline stocks. Lufthansa dropped 2.7%, Air France-KLM 3.1%, IAG 2.1%, Wizz Air 3.0%, and easyJet 0.5%. Brent crude rose 2.5% on the day, adding to cost pressures across the sector.