Ryanair Profits Tumble 34% on Higher Fuel Costs

What happened

Ryanair reported Q2 pre-tax profits of €593 million, down 34% year-over-year, missing analyst expectations of €579 million. Revenue grew just 1% to €4.4 billion while operating costs jumped 11% to €3.8 billion. Passenger traffic increased 6% to 6.1 million, supported by Easter travel in April, but average fares declined 6% as the airline cut prices to stimulate bookings. The company attributed the profit decline primarily to elevated jet fuel costs following military strikes against Iran in February, which disrupted global oil markets and pushed prices to $90 per barrel. Unhedged fuel costs more than doubled during the period, with average jet fuel prices reaching $127 per barrel by early July, a 41% increase year-over-year. Ryanair's share price fell more than 5% following the announcement.

Why it matters

The results highlight how geopolitical tensions directly impact airline profitability through fuel cost volatility and consumer behaviour shifts. Ryanair's 20% unhedged fuel exposure left it vulnerable to price spikes, forcing the company to absorb significant cost increases that could not be fully offset by fare adjustments. Management noted that customers delayed bookings closer to departure dates due to concerns about fuel shortages and economic uncertainty, reducing pricing power. CEO Michael O'Leary warned that the airline's full-year profit remains highly sensitive to ongoing conflicts in the Middle East and Ukraine, as well as unhedged fuel price movements. The company's conservative hedging strategy-80% of 2027 fuel hedged at $67 per barrel and 15% of 2028 hedged at $85 per barrel-provides some protection but cannot fully insulate results from market volatility.

Bigger picture

The earnings reflect broader challenges facing European airlines as geopolitical instability reshapes travel demand and cost structures. The International Energy Agency warned that Europe could face jet fuel shortages within weeks, as most supply comes from the Middle East, forcing airlines to seek alternatives from international markets at higher costs. Ryanair's CFO emphasised that while passenger volumes remain strong with over 715,000 daily travelers, the shift toward last-minute bookings limits revenue optimisation. O'Leary noted that unprofitable airlines face a difficult winter, suggesting that cost advantages from better fuel hedging could widen Ryanair's competitive position relative to less-protected rivals. The airline also provided an update on Boeing's MAX-10 programme, expecting certification in September or October with first deliveries of 15 aircraft planned for spring 2027.

What to watch

Investors should monitor summer fare trends between July and September, which management indicated would be modestly lower year-over-year, with the final outcome heavily dependent on close-in bookings in August and September. Geopolitical developments in the Middle East and Ukraine remain critical variables affecting both fuel costs and consumer confidence. The company noted it has zero visibility into the second half of the year, making meaningful full-year guidance premature. Mediterranean route bookings and load factors, which remained unchanged at 94%, will signal whether demand stabilises. Additionally, jet fuel price movements for unhedged portions and progress on Boeing MAX-10 deliveries scheduled for spring 2027 will influence capacity expansion and cost structure.