Ryanair is rolling out a sweeping cost-reduction programme that includes freezing staff pay and scaling back recruitment, in an effort to soften the blow of a 2 billion euro rise in aviation fuel costs next year.
The European budget carrier is cutting costs and raising fares to cushion the impact of the Iran war. Europe's largest airline expects double-digit percentage fare increases next year, yet it still needs to trim expenses elsewhere to offset the financial strain caused by the conflict.
Chief executive Michael O'Leary said several pay agreements are due to be renegotiated from March next year, and the company may decline to renew them if fuel prices stay elevated. "We are significantly slowing down recruitment, although training courses for new pilots and cabin crew are still going ahead," he said.
Jet fuel prices have soared since the Iran conflict erupted, dealing a heavy blow to airlines. As the industry enters the traditionally weaker winter season, carriers are preparing to cut hundreds of thousands of seats from their winter schedules to save money. Ryanair shares have fallen about a quarter so far this year.
On Monday, Ryanair said pre-tax profit for the April-to-September period fell 16% to 2.4 billion euros, as the Iran conflict made passengers more cautious about travel and pushed operating costs up 10%. The company has hedged 80% of the fuel it needs for the 12 months to March 2027, but warned that the industry as a whole will face significantly higher costs at least until 2028.
"Everybody is gradually waking up to the fact that fuel price hedging across our industry is inadequate," O'Leary said. The budget carrier has hedged about a quarter of its fuel needs for the 12 months to March 2028 at roughly $95 a barrel, well above the $67 a barrel locked in for the current financial year.
Over the past two years Ryanair has taken delivery of about 30 new aircraft annually, but that figure will drop to 15 a year in the coming years. The airline will begin receiving Boeing 737 MAX 10 jets in January. The model offers about 20% more seats than existing aircraft while burning less fuel.
As part of further efforts to cut back-office costs, Ryanair will expand its use of artificial intelligence. O'Leary said the airline has already used AI to lift capacity by 4%, further unlocking the operational potential of its route network.
"When you are operating 650 aircraft, the system is simply too large to optimise by human effort alone," he said, adding: "Machines can actually design flight schedules better than we can, so we are improving the operational efficiency of our aircraft."
Ryanair has already announced it will cut some unprofitable flights this winter, including certain midweek routes. As a result, the company has lowered its expected passenger volume for the 12 months to the end of March next year from 216 million to 214 million.
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