Ryanair has delivered €2.17 billion in net profit for the fiscal year ending March 2025—a 35% leap from the prior year—yet the Irish carrier has withheld any earnings outlook for the next 12 months, citing zero visibility into the second half of 2025 and warning that potential soaring jet fuel costs tied to Middle East geopolitical tensions could threaten margin gains. For investors and travelers tracking Europe's largest low-cost airline, the message is clear: the carrier has delivered record numbers, but geopolitical turbulence now poses a material risk to route economics.
Why This Matters
• Fuel hedging cushion faces exposure: Ryanair has 80% of fuel locked at $67/barrel through April 2027, but the remaining 20% is exposed to spot prices that could spike significantly if Middle East conflicts intensify.
• Summer fares at risk of stalling: Peak-season ticket prices (July–September) are now expected to be broadly flat rather than rising, while first-quarter fares (ending June) may drop mid-single digits year-on-year.
• Traffic targets remain on track: The airline still plans to carry 216 million passengers in 2025 and 222–223 million in 2026, up 4% from 2024 levels.
Strait of Hormuz: A Potential Choke Point in Global Oil Supply
The Strait of Hormuz—the narrow waterway that channels roughly 20% of global oil supply—has become a focal point of concern amid Middle East tensions. If transit becomes significantly restricted, it could trigger what analysts describe as a potential major supply disruption in the oil market. Brent crude prices could reach $100/barrel or higher in a severe scenario, and refined jet fuel prices could more than double from current levels, potentially reaching $1,500+ per tonne or beyond.
European airlines rely heavily on Middle Eastern refineries for jet fuel, and a prolonged conflict could remove roughly one million barrels per day of refined product—over 10% of global supply. The World Bank and energy analysts project that energy prices could surge 24% or more in 2025-2026, a level not seen since 2022. For an airline burning through millions of litres daily, every dollar-per-barrel increase in spot market prices translates directly to margin pressure. Ryanair CEO Michael O'Leary has warned that 10–25% of fuel supplies could potentially be at risk during peak summer months if Middle East tensions escalate dramatically, though he noted that Europe has backup jet fuel sources in West Africa, the Americas, and Norway.
The airline has positioned itself defensively by hedging 80% of its needs at $67/barrel—well below current spot rates—but that 20% unhedged tail creates exposure. Management is projecting a potential mid-single-digit percentage increase in overall costs for the fiscal year ending March 2026 if fuel prices remain elevated. Competitors face steeper challenges: EasyJet, with 70% of fuel hedged, estimates every $100 movement per metric tonne could add £40 million to costs, while Lufthansa has flagged that a sustained fuel crisis could cost an additional €1.7 billion for 2025-2026 despite similar hedging levels.
Airspace Closures: A Potential Secondary Cost Driver
If Middle East tensions escalate further, carriers may be forced to reroute flights away from Iranian, Iraqi, and Gulf airspace, adding flight time and burning extra fuel. Industry analysts estimate that extended rerouting could cancel thousands of regional flights and potentially strand millions of travelers. Longer alternative routes would mean tighter aircraft utilization for intercontinental carriers and higher fuel burn across the industry, which could lift baseline operating costs.
For Ryanair, which operates predominantly within European airspace, direct exposure is limited—but indirect cost pressures are real. Industry-wide margin compression could reduce competitive flexibility and limit fare-cutting room across the sector.
What This Means for Passengers and Investors
Ryanair's decision to withhold FY26 profit guidance is notable. The airline explicitly cited "significant fuel price/potential supply volatility" and stated it has "zero H2 visibility." Translation: management cannot predict whether jet fuel will stabilize, spike, or face physical supply constraints in the second half of 2025 and into 2026.
The immediate consequence for passengers could be stable or slightly lower fares in the near term—first-quarter tickets (ending June) are forecast to drop by a mid-single-digit percentage, reflecting softer demand and economic caution—but a potential sharp repricing upward if fuel costs remain elevated into summer. The airline now expects peak summer fares to be "broadly flat," a shift from earlier growth forecasts that reflects both fuel economics and weakening consumer confidence amid inflation and geopolitical concerns.
For investors, the record profit masks an emerging risk profile. EasyJet has warned of potential challenges in its 2025 first half and has already absorbed significant fuel cost increases in recent months. Lufthansa has flagged that its "risk-opportunity profile has shifted toward greater risks" and could see earnings pressure if Middle East conflicts worsen. O'Leary has publicly warned that prolonged high fuel prices could threaten the viability of weaker European carriers, potentially consolidating market share for more resilient competitors like Ryanair—but only if the airline can absorb cost shocks better than rivals.
Hedging as the Critical Competitive Tool
The single most important variable determining winners and losers in European aviation over the next 12-18 months will be hedge positioning. Ryanair's 80% hedge through April 2027 provides a 12-month cushion that smaller or less capitalized carriers lack. By contrast, many U.S. airlines have discontinued hedging programs, leaving them fully exposed to spot volatility. European carriers with 60–70% hedges could face steeper cost curves, and their 20–30% unhedged tail could become a material earnings drag if Brent crude climbs above $80 or jet fuel rises above $1,500 per tonne.
Ryanair's traffic growth target—222–223 million passengers in 2026, up from 216 million in 2025—assumes that fuel supply will normalize and that the airline maintains its cost advantage. If either assumption breaks down, the airline may be forced to cut capacity, raise fares, or both, compressing margins and volume simultaneously.
Outlook: Vigilance Required Amid Uncertainty
The Malta-based investor or frequent flyer should note that Ryanair's refusal to issue FY26 guidance reflects the genuine uncertainty around external factors, not operational weakness. The airline delivered a 35% profit jump in FY25 despite mounting Middle East tensions, demonstrating resilience. But the looming uncertainties—whether Middle East tensions de-escalate, whether Strait of Hormuz transit normalizes, whether refinery capacity recovers, and whether European fuel imports can fill potential supply gaps—will determine whether the carrier can sustain this performance.
For now, the airline's hedge provides insulation through spring 2027, but the unhedged 20% represents potential exposure if spot prices remain elevated. Travelers should expect stable or slightly lower fares in the near term, but should be prepared for the risk of a sharp repricing upward in late 2025 or 2026 if fuel crises intensify. Investors, meanwhile, should closely monitor crude oil benchmarks and Middle East geopolitical developments as barometers of airline earnings risk—because in this environment, fuel supply and pricing are the dominant story, and everything else is secondary.
