Ryanair profits slump as Iran war dampens fares, hikes fuel costs
Ryanair's Financial Performance Impacted by Geopolitical Tensions
By Conor Humphries
Profit Decline and Market Reaction
DUBLIN, July 20 (Reuters) - Ryanair's profit slumped by a third in its most recent quarter on higher fuel costs and lower fares that look set to remain weak through the key summer period amid renewed consumer nervousness due to the Iran war, the airline said on Monday.
The weak April-June 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 after an interim ceasefire deal unravelled, pushing oil prices back above $90 a barrel, which was making people more nervous about travelling, Ryanair chief Michael O'Leary said.
Consumer Confidence and Fare Trends
"There's a war going on in the world. There's a lot of uncertainty," O'Leary told analysts, forecasting fares faced a mid-single-digit year-on-year fall in the current quarter.
"We're now well into the peak period of July and August, and I think it (pricing) is trending weaker rather than stronger."
Ryanair shares were down more than 6%, while those of rivals Wizz, Lufthansa, British Airways' owner IAG and Air France-KLM were also all lower.
Industry Outlook and Capacity Changes
CFO Sees Capacity Falls, Fare Increases in Coming Year
CFO SEES CAPACITY FALLS, FARE INCREASES IN COMING YEAR
Weakness in fares could, however, be short-lived as European aviation faces a wave of consolidation and airlines going bust that will take out capacity, Chief Financial Officer Neil Sorahan told Reuters.
"I wouldn't be surprised to see some casualties from some of the weaker guys this year," he said. "I think there will be other airlines either consolidated or going bust, and ultimately capacity comes out, and fares I think will go up."
Potential for Industry Consolidation
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.
Fuel Hedging and Profit Forecast
Ryanair Used Ceasefire Oil Price Drop to Extend Some Hedges
RYANAIR USED CEASEFIRE OIL PRICE DROP TO EXTEND SOME HEDGES
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 rest of the summer.
Fuel Hedging Strategy
It said it was better positioned than most rivals because 80% of its fuel requirements to the end of March 2027 are hedged at $67 per barrel, while it also stepped in to hedge 15% of its fuel needs for the following year at $85 per barrel during the recent interim ceasefire.
Still the price of its 20% unhedged fuel doubled to hit $150 a barrel in the April-June quarter.
($1 = 0.8739 euros)
(Writing by Conor Humphries; Editing by Kevin Buckland and Neil Fullick, Kirsten Donovan)
