The airline warns of impending jet fuel price hikes
Ryanair is warning that jet fuel prices could rocket next summer, putting some of its European rivals at risk of going under, reports BritPanorama.
The budget carrier announced it had taken emergency measures to shield itself from the elevated jet fuel costs triggered by the Iran war, scaling back its passenger targets from 216 million to 214 million for this year.
The Dublin-based airline revealed it had locked in fixed-price contracts for 80 percent of its fuel requirements for the year ahead, but chose to axe certain flights to reduce the volume of fuel it must purchase at market rates.
The reduced flight schedule is expected to ease Ryanair’s winter losses by €70 million to €100 million. The carrier remains on course to grow its summer passenger numbers by more than five percent to 145 million this year.
Ryanair cautioned that several of its European competitors face greater exposure to the surging jet fuel costs brought about by the closure of the Strait of Hormuz. “If high oil prices continue through to next summer, Ryanair believes short-haul airfares in Europe will increase materially to reflect higher oil prices,” the airline stated.
“Some less well-hedged competitors will struggle to maintain capacity or even survive this coming winter season.”
In July, Ryanair disclosed that the cost of the 20 percent of its fuel requirements that were not fixed-price had more than doubled at the start of this year, to $150 per barrel.
Consequently, the carrier’s operating costs surged 11 percent to €3.8 billion in the three months to June, while its pre-tax profit plummeted 36 percent to €593 million.
The airline, which is listed in both Dublin and New York, announced in May that it would slash some of its fares to drive up passenger volumes and counter the softening demand triggered by the Middle East conflict.
Ryanair is far from alone in feeling the pinch from the Iran war. Tourism giant Tui swung to a €17 million loss in the six months to June, attributing the shortfall to rising fuel costs and subdued travel demand.
EasyJet absorbed a £200 million blow to its profits in the three months to June, as fuel costs per passenger rocketed by £100 million, or 13 percent.
The airline industry is bracing for a challenging period as external geopolitical factors continue to affect operational costs and consumer demand.
