Ryanair profits drop as Iran war puts off passengers and lifts fuel costs
Ryanair’s profits fell sharply as the war in the Middle East caused jet fuel prices to rise and customers were reluctant to book flights.
The Irish airline’s pre-tax profits fell 34% to €593 million (£503 million) between April and June, while sales remained flat as the company was forced to cut fares to stimulate demand.
Ryanair also said it expected summer fares to be slightly lower than last year due to “consumer hesitancy” around air travel.
Prices to refuel aircraft have risen since the US and Israel launched an attack on Iran in February, and while Ryanair said it was “hedging” or making agreements for future fuel costs, those not included in those arrangements have more than doubled.
Crude oil prices reached $90 (£67) a barrel for the first time in a month, before falling slightly following intense clashes between the US and Iran over the weekend.
Traffic in the Strait of Hormuz, an important route for global oil and gas supplies, has come to a halt.
Last month’s interim peace agreement brought some respite to oil and energy prices, but prices rose again as negotiations broke down and conflict resumed.
The airline warned that its results this year would be “extremely sensitive” to external factors such as escalating conflicts in the Middle East and Ukraine, as well as the unhedged price of jet fuel.
Shane Oliver, head of investment strategy at fund manager AMP, said: “The longer the strait remains closed and the war escalates, the greater the risk that oil prices will rise to $150 a barrel to drive down demand to coincide with the hit to supply.”
He said: “This is not our base case but again it is a high risk.”
Ryanair said fares for the crucial summer period between July and September were on track to be “modestly” lower than last year, with many passengers booking closer to departure than usual.
The firm’s chief financial officer, Neil Sorahan, said flights on popular Mediterranean routes were still full. “People [are] “Even though we booked a little later, we are as eager to get away as ever,” he said.
Between April and June, Ryanair’s revenue increased by 1% to €4.4 billion.
The number of passengers increased to 6% Ticket prices fell 6% to 6.1 million, helped by the Easter holiday in April, as the airline cut fares to woo passengers concerned about the Iran war.
