Ryanair has issued a stark warning that soaring fuel costs could wipe out rival airlines by December. The Irish low-cost carrier, which competes with Easyjet, TUI, Jet2 and others, says smaller carriers are already struggling to stay afloat as costs spiral.
Fuel costs double amid Iran conflict
Chief financial officer Neil Sorahan told Reuters that jet fuel prices have doubled to 150 US dollars (£111) per barrel in the quarter, driven by the Iran war and the blocking of the vital Strait of Hormuz. This has sent Ryanair's operating costs jumping 11% higher to 3.42 billion euro (£2.9 billion) in the quarter.
"A few airlines are on the edge and are going to have a very difficult winter," Sorahan said. "I wouldn't be surprised if some fail." He added that significant capacity will come out of the market this winter, regardless of what happens with Easyjet.
Impact on bookings and fares
Despite the challenges, Sorahan noted no negative impact on bookings from European heatwaves, but said fare levels have shown only a slight improvement and are trending down. Ryanair boss Michael O'Leary warned that the Middle East conflict has led to consumer hesitancy, concerns about EU jet-fuel shortages, economic uncertainty and later bookings.
O'Leary cautioned that it is too early to predict how the rest of the year will unfold, as results remain "highly sensitive to adverse external developments, including conflict escalation in the Middle East and Ukraine, the price of unhedged jet-fuel, macro-economic shocks and continuing European air traffic control strikes and mismanagement".
Local relevance
Ryanair, based in Dublin, is among the carriers operating from Birmingham Airport (BHX), highlighting the potential local impact of any airline failures.
