Ryanair looks to slash costs as fuel prices soar

(Sharecast News) - Budget airline Ryanair has launched a sweeping review of costs, including possible recruitment and pay freezes, as it seeks to mitigate a �2bn spike in fuel prices.

Publishing half-year numbers on Monday, the Irish carrier said passenger numbers had risen by 6% in the six months to September end to 125.8m, while revenues were 3% higher at �10.08bn.

However, operating costs spiked 10% to �7.69bn, after the price of its unhedged jet fuel doubled, average fares fell 4% and profits after tax were down 15% at �2.15bn.

Global energy markets were thrown into turmoil when the US first attacked Iran earlier this year. While the two countries have since agreed an uneasy ceasefire, oil prices remain elevated and analysts fear hostilities will ramp up again once the US mid-terms are over.

Ryanair said the conflict had led to "consumer hesitancy" and later bookings, but with 80% of jet fuel hedged at around $67 a barrel, this year's earnings were "well insulated" from the current oil price volatility.

However, looking further ahead and chief executive Michael O'Leary warned: "Unless there is a swift resolution of the Middle East conflict, we expect jet-fuel prices to remain elevated well into 2027. As low-cost oil hedges roll off ahead of summer 2027, all EU airlines face a significantly higher fuel bill next year."

He noted that short-haul airfares would likely rise "materially" in response, but that it would still not be enough to fully offset an estimated �2bn increase in its 2028 full-year fuel bill.

The airline is therefore launching a company-wide review of costs, including airport churn negotiations and maturing labour agreements - which could include temporary pay freezes - lower crewing ratios and increased use of artificial intelligence.

Ryanair also cautioned that while demand in the current quarter was "strong", with fares trending modestly ahead of the same period a year earlier, full-year profits after tax remained "highly sensitive to adverse external developments, including conflict escalation in the Middle East and Ukraine, the price of our 20% unhedged jet-fuel, macro-economic shocks and the impact of European ATC disruptions".

Dan Coatsworth, head of markets at AJ Bell, said: "Ryanair is no stranger to navigating difficult environments and while it may experience some pain near-term, the business has form in emerging triumphant from challenging situations. Customers are going to have to lump it when it comes to the extra cost of flying - it's unlikely they will be able to go to a rival and make significant savings, as the entire industry is in the same boat."

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