Ryanair to review pay freezes, AI use to counter jet fuel price surge

Ryanair, the low-cost airline based in Dublin, is contemplating several measures to counter the rising cost of jet fuel next year. The company anticipates that fuel prices will remain high until at least 2027 due to ongoing conflicts in the Middle East. Currently, Ryanair has protected around 80% of its jet fuel costs by hedging them at lower prices compared to the market rate.

However, this protection will gradually expire at the end of the financial year, leading to an estimated increase of about €2 billion ($2.22 billion) in fuel expenses for the year ending March 2028.

To mitigate this financial impact, Ryanair is reviewing various costs across its operations. The focus is on labor agreements, which could result in temporary pay freezes, and reducing crewing ratios. The company is also evaluating the potential increased use of AI technology to enhance productivity in both operational and back-office functions.

Despite these adjustments, Ryanair expects European short-haul airfares to rise significantly to account for the higher fuel costs. However, this increase alone is unlikely to fully offset the financial strain. The company's profit after tax decreased by 15% to €2.15 billion for the half-year period ending September, while revenues grew by 3% to €10.08 billion. This growth was driven by a 6% increase in passenger numbers, but operating costs rose by 10%, totaling €7.69 billion for the period.

Michael O’Leary, Ryanair's chief executive, acknowledged strong demand in the third quarter, with fares modestly increasing compared to the same period last year. However, he noted that the booking window remains relatively short, making visibility challenging. The effectiveness of the quarter's fares will largely depend on the strength of mid-term school holidays and Christmas bookings.

As usual, Ryanair has no visibility for the fourth quarter, making it premature to provide a full-year profit-after-tax guidance for 2027.