Ryanair has warned that the price of jet fuel could soar next summer, threatening some of its European competitors with collapse.

The budget airline said it has taken emergency measures to protect itself from higher jet fuel prices caused by the Iran war, trimming its passenger target from 216 million to 214 million for this year. The warning comes as airlines across Europe continue to contend with a fuel market that can quickly feed through into fares, costs and capacity decisions, especially on short-haul routes where competition is tight and margins are thin.

The Dublin-based carrier said it has secured fixed-price contracts for 80 per cent of its fuel needs for the coming year, but has also cut some flights to reduce the amount of fuel it must buy at market rates.

The lower flight schedule will soften Ryanair’s losses for the winter period by €70 million to €100 million. The airline said it is on track to grow its summer traffic by more than 5 per cent to 145 million this year.

Ryanair warned that some of its European competitors are more exposed to the surge in jet fuel prices triggered 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 Dublin-based firm said.

“Some less well-hedged competitors will struggle to maintain capacity or even survive this coming winter season.”

Fuel costs double

In July, Ryanair said the cost of the 20 per cent of its fuel needs that were not fixed-price had more than doubled at the start of this year, to $150 per barrel.

As a result, operating costs rose 11 per cent to €3.8 billion in the three months to June, while pre-tax profit fell 36 per cent to €593 million.

The airline, which is listed in Dublin and New York, said in May that it would discount some fares to increase volumes as it contended with weaker demand caused by the Middle East conflict. That makes fuel hedging, flight scheduling and fare discounting central to how carriers are managing the current shock rather than relying on demand alone.

Ryanair is not the only airline to be affected by the Iran war. Tourism group Tui swung to a €17 million loss in the six months to June, blaming higher fuel costs and weaker travel demand.

EasyJet took a £200 million hit to profit in the three months to June, as fuel costs per passenger surged by £100 million, or 13 per cent.

By CityAM