Ryanair has issued a warning that a potential surge in jet fuel prices next summer could jeopardise the survival of some of its European competitors. The airline attributes these higher prices to the Iran war and the closure of the Strait of Hormuz.
In response, the Dublin-based budget carrier has implemented emergency measures, including trimming its passenger targets for this year from 216 million to 214 million. Ryanair has also secured fixed-price contracts for 80 per cent of its fuel requirements for the upcoming year and has cut some flights to reduce market-rate fuel purchases.
These schedule adjustments are projected to decrease Ryanair's winter losses by €70m to €100m. The airline anticipates growing its summer traffic by over five per cent to 145 million this year.
Ryanair stated that if high oil prices persist into next summer, short-haul airfares in Europe are expected to increase significantly. The company believes that some less well-hedged competitors may struggle to maintain capacity or survive the upcoming winter season.
The airline previously reported in July that the cost for the 20 per cent of its fuel not covered by fixed prices had more than doubled to $150 per barrel at the start of this year. This contributed to an 11 per cent rise in operating costs to €3.8bn in the three months to June, and a 36 per cent slump in pre-tax profit to €593m.
Other airlines have also been affected by the Iran war, with Easyjet reporting a £200m hit to its profit in the three months to June due to surging fuel costs.