Airline also weighs up reducing crew on flights and increasing use of AI as part of cost-cutting measures
Ryanair has said it is considering implementing pay freezes, setting the scene for a confrontation with unions as the airline tries to offset soaring fuel costs driven by the Middle East conflict.
The airline is also considering reducing crew numbers on flights and increasing the use of AI, in a cost-cutting drive.
Europe’s largest low-cost carrier said it expected European airlines to raise ticket prices by up to 20%, with its own jet fuel costs forecast to rise by about €2bn (£1.6bn) in its next financial year, which ends in March 2028.
“Unless there is a swift resolution of the Middle East conflict we expect jet fuel prices to remain elevated well into 2027,” said Michael O’Leary, the chief executive of Ryanair. “While we believe European short-haul fares will increase materially to reflect these much higher jet-fuel prices and competitor capacity reductions, this is unlikely to provide a full offset for an estimated €2bn increase in our fuel bill.”
Oil prices hit a six-month high on Friday before falling to about $110 a barrel on Monday.
Ryanair expects European short-haul fares to “increase materially” next year, as fuel hedging deals taken out by airlines to reduce costs expire.
“To help address this, we’re reviewing all costs across group airlines with a particular focus on airport churn negotiations, maturing labour agreements (which may require temporary pay freezes), lower crew ratios and increased use of AI,” O’Leary said.
He said the company had several pay deals that would come up for renegotiation from March.
However, the Unite union said it had a multiyear pay deal in place that covered 2027, and in any case was not linked to company performance.
“Unite hasn’t been advised of any such proposals and we have a multiyear pay deal in place which covers next year,” said Oliver Richardson, a national officer at the union. “A number of unions across Europe have the same. Our pay agreement was not attached to, nor dependent on company performance. This was something that the Ryanair was at pains to emphasise. As such we would expect it to be honoured.”
O’Leary also said Ryanair was “slowing down hiring meaningfully” for new pilots, cabin crew and across its training courses.
The company said its increased use of AI would focus on improving productivity in operations and back-office and support functions.
O’Leary said AI had already been used to increase capacity by 4%.
“When you’re running 650 aircraft, it’s too big for a human to be able to do it,” he said. “The machines can actually design the schedules better than we know [how to do], so we are getting more productivity out of the aircraft.”
Ryanair said 80% of its fuel requirements until the end of March were hedged at $67 a barrel. Twenty-five per cent of its fuel requirements for the subsequent 12 months are hedged at $95 a barrel.
“It’s beginning to dawn on everybody that we [the industry] are not well hedged,” O’Leary said.
The Irish airline, Europe’s largest by passenger numbers, said average fares fell by 2% year on year in the quarter ending in September. Ryanair added that fares in the final three months of the year were trending “modestly ahead” of the same quarter last year.
“The booking window remains closer-in which reduces visibility,” the company said. “[The current quarter’s] fare outcome will heavily depend on the strength of close-in October-November school midterm [holiday] and Christmas bookings.”
The airline reported a post-tax profit of €1.61bn in the quarter ending in September, a fall of 6% year on year but in line with analyst expectations. Passenger numbers grew 5% year on year to 64.5 million during the quarter.
Ryanair has taken delivery of about 30 aircraft annually over the last two years, but the delivery rate is set to drop to 15 annually for the next few years.
The airline said it was to take deliveries of the Boeing 737 Max 10 aircraft in January, which has about 20% more seats but burns a fifth less fuel than its current fleet.
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Source: www.theguardian.com
