Ryanair CEO Predicts Airline Collapses Unless Jet Fuel Prices Drop This Summer
The head of Europe’s largest budget airline is warning that rising jet fuel costs could push several carriers into bankruptcy before the summer is over. Ryanair CEO Michael O’Leary told CNBC on Thursday that while his own airline is well protected, competitors are in serious trouble if fuel prices don’t come down.
Speaking at an investment conference in Oslo, O’Leary explained that Ryanair has locked in 80% of its fuel costs through hedging, insulating it from the recent price spikes. But he said other airlines are exposed. “If pricing stays higher for longer this summer, a number of our competitors will face real financial difficulties. There will be failures,” he said.
The crisis stems from the blockade of the Strait of Hormuz, which began after the Middle East conflict erupted in late February. Jet fuel prices have nearly doubled since March, climbing from $80 a barrel to around $150. According to the International Air Travel Association, the average price hit $179 per barrel in late April.
O’Leary said a prolonged spike through July, August and September would trigger airline failures, which he added would ultimately benefit Ryanair in the medium term. “We are the best insulated, most hedged airline in Europe,” he said. “No price increases, no fuel surcharges, no matter what happens.”
The pain is already showing elsewhere. EasyJet reported £25 million in extra fuel costs in March and a half-year loss of up to £560 million. It has hedged 70% of its summer fuel but warned it will still need to cut costs and raise fares. Lufthansa has trimmed 20,000 short-haul flights through October to save fuel. SAS canceled 1,000 flights in April, and KLM reduced capacity by 80 flights due to rising kerosene costs.
The International Energy Agency warned last week that Europe could face jet fuel shortages within six weeks, depending on how much it can import from outside the Middle East, which previously supplied 75% of the region’s jet fuel. O’Leary urged for the Strait of Hormuz to reopen as quickly as possible.