Dan Coatsworth, head of markets at AJ Bell, said: “Ryanair is shielded from much of the cost pressures linked to the Middle East conflict which has driven up the cost of oil, but it doesn’t have full protection.
“It has locked in 80% of its fuel requirements until April 2027 at much lower prices than it would pay on the market today, giving it a major cost advantage against many rivals. However, the remaining 20% of the fuel requirement is fully exposed to market gyrations and the pain is beginning to be felt.
“Cost pressures are tightening like a vice across multiple parts of its business. In addition to fuel, it is also shelling out more for maintenance and labour, and EU environmental taxes are edging higher.
“Under normal circumstances, Ryanair would respond to cost pressures by putting up fares and passenger charges, but the market environment is currently too fragile to go down that road. Consumers are spooked by oil prices shooting up since March and remaining relatively high. It’s made the cost of living go up, and that drives more caution towards spending.
“Airlines and holiday companies are having to drop prices, or at best keep them level, just to keep demand ticking over. If cost pressures remain intense, they will have no choice but to put prices up. Fortunately, Ryanair has a strong enough balance sheet to weather any storms.
“Talks have neared a conclusion to keep Michael O’Leary as chief executive for an extra four years, taking his contract to April 2033. Ryanair is now set to discuss leadership with its biggest shareholders, and it is hard to imagine any would object to O’Leary staying on longer. He has been the driving force behind significant strategic progress, keeping a lid on costs while continuously finding new ways to earn from customers.
“Reliability, efficiency and scale are vital drivers for success in the aviation industry – and Ryanair has these in spades.”
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