By Conor Humphries
DUBLIN, July 20 (Reuters) – Ryanair’s profit slumped by a third on higher fuel costs and weaker fares in the April-June quarter, the airline said on Monday, while summer fares look set to fall amid consumer nervousness around the Iran war and broader economy.
The weak results for Ryanair, Europe’s largest airline by passenger numbers, are the latest sign of how the five-month-old Iran war is turning up the pressure on companies as peace talks drag and oil prices remain elevated.
On Monday, U.S. forces hit Iran for a ninth consecutive day as part of an escalating cycle of attacks between the pair after an interim ceasefire agreement signed a month ago unravelled, pushing oil prices back up.
Ryanair shares were down 6% at €24.36 at 0800 GMT. Rivals Wizz, Lufthansa, British Airways’ owner IAG and Air France KLM were also all lower.
“The price of our 20% unhedged fuel doubled in the quarter and fares fell 6%, primarily we think due to the impact of the Middle East conflict” and the timing of Easter, Chief Executive Michael O’Leary said in a video presentation.
FARES ‘TRENDING MODESTLY DOWN’
The Irish airline reported after-tax profit of €538 million ($616 million) for its fiscal first quarter through June 30, down 34% from the previous year and short of a forecast of €579 million in a company poll of analysts.
The airline said it was too early to forecast profit for the full year, which would depend heavily on last-minute bookings over the remainder of the summer.
It said it was better positioned than most rivals because 80% of its fuel requirements to the end of March are hedged at $67 per barrel, compared to recent peaks around $150.
Chief Financial Officer Neil Sorahan said the airline stepped in to hedge 15% of its fuel needs for the year to end-March 2028 at $85 per barrel following an interim ceasefire between Iran and the United States that has since unravelled.
CFO SEES CAPACITY FALLS, FARE INCREASES IN COMING YEAR
Weakness in fares is likely to be short-lived, however, as European aviation is facing a wave of consolidation and airlines going bust that will take out capacity, Sorahan said.
“I wouldn’t be surprised to see a number of casualties this winter … there’s a few people very much on the edge,” Sorahan said in an interview.
He said he expected “significant capacity” to be cut in Europe this winter, “which could be positive for pricing,” and a lot more may be taken out in summer 2027.
The possible sale of British rival easyJet, which is the subject of a bidding war, could also lead to a reduction in capacity and could trigger a “domino effect” of consolidation in Europe, Sorahan said.
($1 = 0.8739 euros)
(Writing by Conor Humphries; Editing by Kevin Buckland and Neil Fullick, Kirsten Donovan)
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