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Recent years have seen multiple crises impacting fuel prices, with the current war in Iran and the blockading of the Straits of Hormuz having the greatest impact. Ask Traders reports that Ryanair has said that jet fuel has been trading at almost $140 per barrel. Something has to give to ensure airlines can maintain profitability, be that a reduction in services, cuts to staffing costs, or an increase in ticket prices.
The response from Ryanairhas been to cut its traffic targets for FY27 by two million passengers. That will let it focus on high-yield routes while removing services that would run at a loss. The carrier says the move will reduce winter losses by up to $81 million (€70 million) to $116 million (€100 million).
The Cuts Are About Exposure To Unhedged Winter Oil
Ryanair has decided to cut passenger targets for the year up to March 31, 2027, from 216 million to 214 million customers. This will reduce the carrier’s reliance on unhedged oil during the seldom profitable off-season. Unhedged oil refers to jet fuel supplies that are purchased ad hoc without contracts that lock in specific prices. Airlines use this type of oil to deal with shortfalls in contracted supplies. However, they try not to use it where possible because the pricing is incredibly volatile.
The flight cut will allow Ryanair to stick to its hedged oil supplies. The airline currently has 80% of its jet fuel hedged at an incredibly low $67 per barrel. A further 15% is hedged at $85 a barrel.
The airline has said commented on the increased prices in a statement obtained by The Guardian.
“If high oil prices continue through to summer 2027, Ryanair believes short-haul air fares in Europe will increase materially to reflect higher oil prices, as some less well-hedged competitors will struggle to maintain capacity or even survive this coming winter season.”
Ryanair Remains Positioned To Record A Profitable Year
Ryanair will still call this year a success despite the need to cut back on flights. The airline expects to achieve another profitable year. However, Quartz has reported that the airline expects to fall below the record $2.52 billion (€2.17 billion). Such figures for FY27 can only be speculation, as it remains too early to be sure of the likely results of the cutbacks and fuel hedging.
Other successes include the carrier’s excellent execution of its business model, low fares, and high capacity. The airline was on track to achieve a five percent rise in passenger numbers from April to October compared with last year, from 138 million to 145 million. Despite the coming capacity cuts, these numbers suggest the airlineis in good stead once fuel prices recover. The airline has also reported that its fares have been drifting “modestly down” this summer compared with last summer.
Ryanair Also Suspended 17 Routes This Summer
Along with the overall capacity reduction, Ryanair has also been suspending routes, as reported by Simple Flying’s James Pearson. One example is its flights to the Jordanian capital of Amman, which it has served for eight years. These trips to Queen Alia International Airport (AMM) weren’t scheduled to return until the end of October. It was the only Middle East destination the airline had planned to fly to because of the ongoing conflict in the Region.
The AMM suspension covers 17 routes because Ryanair previously flew to the airport from 17 cities. Even when the routes to AMM return, they will only be from four airports: Budapest Liszt Ferenc International Airport (BUD), Bucharest International Airport (OTP), Madrid Barajas Airport (MAD), and Vienna International Airport (VIE).
