O'Leary Says European Fares Could Rise 10% to 20% in 2027 as Ryanair Hedges Roll Off

Since Ryanair reported a 15% drop in first-half profit to €2.15 billion today, Nov. 2, CEO Michael O'Leary has put numbers on what that means for passengers. In an interview with CNBC's Steve Sedgwick, he said European airfares will climb "by 10%, maybe even 20%" next year.

"The market customers have been insulated for the last 12 months... but those hedges are rolling off," O'Leary said. "There's still no resolution in the Middle East. Jet oil today is $170 a barrel. I mean, this is a very significant cost cliff we're all facing next year."

O'Leary told Euronews in late October that fares could rise by up to 20% in 2027.

The hedge gap

Ryanair hedged 80% of its jet fuel at $67 a barrel for the year ending March 2027. The other 20% was unhedged, and its price doubled to about $130 a barrel in the half-year, the company said.

For the following 12 months, Ryanair has hedged at least 25% of its needs at $95 a barrel. Against jet fuel at $170, the remaining 75% carries heavy exposure.

Crude is cheaper than jet fuel. Brent hit a six-month high on Friday before falling to about $110 a barrel on Monday. The International Air Transport Association has said Persian Gulf export disruptions, refinery constraints and low stocks have pushed refined products such as jet fuel above crude prices.

O'Leary said the industry is only now waking up to the problem. "It's beginning to dawn on everybody that we [the industry] are not well hedged," he said.

What the half-year numbers show

Revenue rose 3% to €10.08 billion and passengers grew 6% to 125.8 million. Average fares fell 4% over the six months to Sept. 30, and 2% in the September quarter. Ryanair blamed consumer hesitancy and later bookings tied to the Middle East conflict.

Operating costs rose 10% to €7.69 billion. Second-quarter profit after tax fell 6% to €1.61 billion, in line with analyst forecasts. Ryanair held €2.6 billion in cash on Sept. 30.

The company declared an interim dividend and an €800 million share buyback. The buyback is due to start in February 2027 and run for about 10 months, subject to market conditions.

Capacity and cost cuts

O'Leary said Ryanair cut winter capacity for the first time in years, and winter traffic will be roughly flat on last year. "It makes no sense for us to be growing capacity if we're buying unhedged oil at $170 a barrel," he said. In September the airline trimmed its full-year traffic target from 216 million to 214 million passengers.

He also said Ryanair is "slowing down hiring meaningfully." He said AI has already helped lift capacity by 4%. "When you're running 650 aircraft, it's too big for a human to be able to do it," he told the Guardian. He added that the machines design schedules better than people.

O'Leary expects higher fares and competitor capacity cuts to fall short of covering the extra fuel cost. The company's statement says higher fares are "unlikely to provide a full offset."

Not every airline is equally exposed

The 10% to 20% figure is O'Leary's forecast, and it comes from the head of a company with a stake in higher fares. It is not a measure of what other carriers will charge. Hedge positions differ widely.

Reuters data cited in Greek press shows easyJet had hedged 62% of its fuel for the first half of 2027 and 37% for the second half. Air France-KLM had announced 40% cover for 2027. Lufthansa has warned that its extra 2026 fuel cost will exceed its earlier estimate of €1.5 billion. Delta Air Lines estimated its annual fuel cost would run about $6 billion above 2025.

Eurocontrol data shows the average jet fuel price rose about 23% from August to early October, from $3.86 to $4.74 a gallon.

The market reaction

Ryanair's Irish-listed shares edged higher early Monday, then slipped below flat. The stock is down more than 22% this year.

Adam Vetesse, market analyst at eToro, said investors "appear to have already priced in the hit from unhedged fuel and softer summer fares." He added that the market seemed relieved the quarter landed where consensus had predicted. He said near-term earnings "remain hostage to oil prices and close-in bookings."

O'Leary gave the same caution on demand. Fares for the October to December quarter are trending "modestly ahead" of last year. The final result "will heavily depend on the strength of close-in October-November school midterm and Christmas bookings," he said. Of the January to March quarter, O'Leary said, "we have zero Q4 visibility."

Ryanair has given no full-year profit guidance. How much of a 10% to 20% fare increase materializes will show up in winter and spring bookings, ahead of the hedge roll-off the company has said will hit from April 2027.