Ryanair profit tumbles as jet fuel prices soar

Ryanair shed more than a third of its profit as rising jet fuel prices triggered by the Iran war began to take effect. 

The budget airline had previously insulated itself from rising fuel prices by fixing its energy costs on hedged contracts. 

But Ryanair said the cost of the 20 per cent of its jet fuel that it had not hedged more than doubled in the first quarter of this year, to $150 per barrel.

As a result, the firm’s operating costs jumped 11 per cent to €3.8bn in the three months to June and its pre-tax profit slumped by 36 per cent to €593m. 

The airline, which is listed in Dublin and New York, said in May that it would discount some of its fares to push up volumes to contend with lower demand caused by the Middle East conflict.

Traffic jumped six per cent in the first quarter of this year but lower fares meant that the airline’s revenue slipped by one per cent to €4.3bn in the period. 

Fares were lower at the beginning of this year because “the Middle East conflict led to consumer hesitancy, concerns about EU jet-fuel shortages, economic uncertainty and later bookings,” chief executive Michael O’Leary told investors.

“Despite a recent, slight, uptick in volumes, and less price stimulation, second-quarter pricing is trending modestly down year-on-year and the final first-half fare outcome is heavily dependent on the strength of close-in bookings in August and September,” he added.

Airlines have warned that fears over travel disruption caused by the Iran war are causing holidaymakers to book at last-minute, hampering the ability of carriers to plan ahead.

Ryanair said its “conservative” jet fuel hedging policy still leaves it better protected than its EU competitors. 

The airline said that 80 per cent of its fuel needs for the current financial year are fixed at $67 per barrel.

But Ryanair’s energy costs are set to jump next year, with 15 per cent of its requirement for the 2028 financial year hedged at $85 per barrel.

Stockbroker Panmure Liberum said Ryanair’s update will be viewed as “slightly disappointing” by the market, as the firm’s profit undershot analyst expectations.

In June, the airline handed O’Leary a six year extension as part of a new contract which could see him given 10m additional shares.

Stan McCarthy, Ryanair chairman, said that he is “pleased to report” that O’Leary has agreed to extending his leadership “for the benefit of all shareholders.”

O’Leary, known for his colourful personality and fiery language, is one of Ireland’s wealthiest businessmen.

Shares in Ryanair slipped 5.7 per cent on Euronext Dublin to €24 on Monday, and 5.7 per cent on the Nasdaq to $63.