Ryanair Holdings chief executive Michael O’Leary has forecast a record increase in European air fares next year as the Middle East war continues to push up oil prices, forcing airlines to pass on their fuel costs to consumers.
Ticket prices are set to increase by as much as 20 per cent next year, Mr O’Leary told a news conference in Brussels on Tuesday. As a result, airline margins will be squeezed because even the jump in fuel surcharges won’t make up for the higher oil bill, he said.
“You’re going to see the biggest increase in airfares, I would say in history, in Europe in the next 12 months,” Mr O’Leary said. “The question is, will that increase in airfares be enough to cover the dramatically higher oil bills? I don’t think it will be.”
The comments by the head of Europe’s largest budget carrier add to the more pessimistic outlook for the aviation industry, which has been forced to contend with a dramatic rise in costs even as travellers continue to splurge on air tickets.
Mr O’Leary said most European airlines, including his own, lack significant hedging next year to protect against higher oil prices. In addition, there’s less capacity in the market as some airlines struggle, while higher taxes are further dimming the picture for the industry.
“We’re 85 per cent unhedged next year, and most of the other European airlines are in a similar position,” he said.
Ryanair's shares dropped as much as 2.1 per cent, bringing the decline to 25 per cent for the year. At that rate, that would be the worst annual stock return since 2018.
The chief executive used his news conference to dish out against regulation in markets such as France and Belgium, where Ryanair will reduce its footprint in response to higher taxes. He repeated that the European aviation industry will continue to consolidate as weaker players struggle to survive in a high-cost environment.
Air Baltic and Spain’s Volotea are the latest European carriers to undergo restructuring as higher costs take their toll. Last week, Deutsche Lufthansa won the race against Air France-KLM to acquire a stake in Portugal’s state-owned TAP. Meanwhile, US private equity firm Apollo Global Management is laying out the framework to take over EasyJet.
Airlines across the world have suffered from soaring jet fuel costs since the Iran war began in late February. Ryanair’s most recent earnings in July showed the conflict hit its profit and caused later bookings amid concern about jet-fuel supply availability.
Mr O’Leary said separately that he aims to receive the first delivery of the carrier’s Boeing Max 10 aircraft in January, with about 16 more expected up to April.
