Ryanair is contemplating pay freezes, staff reductions, and increased use of artificial intelligence (AI) as part of a strategy to handle rising fuel costs exacerbated by the ongoing Middle East conflict. The European low-cost carrier anticipates its fuel expenses to surge by about €2 billion by the financial year ending March 2028, according to Chief Executive Michael O’Leary.
O’Leary has warned that unless the conflict in the Middle East is resolved soon, high fuel prices might persist through 2027. As a result, Ryanair is reviewing labour agreements, airport charges, staffing levels, and operational costs as part of its cost-reduction measures. Some pay agreements that are due for renegotiation from March might face temporary freezes, a move that could create friction with trade unions.
The Unite union, which has a multi-year pay agreement with Ryanair covering 2027, expects the airline to honor its commitments, stating that the agreement is not dependent on the company’s financial performance. Despite these challenges, Ryanair remains committed to maintaining operational efficiency by slowing the recruitment of new pilots and cabin crew and expanding its use of AI, which has already improved aircraft capacity by 4% through better flight scheduling and aircraft utilization.
Ryanair projects European short-haul airfares to rise significantly next year due to increased fuel expenses and the expiration of existing fuel-hedging agreements. The airline has hedged 80% of its fuel needs until the end of March at $67 per barrel, but only 25% of its fuel requirements for the subsequent 12 months are secured at around $95 per barrel. Despite these rising operational costs, Ryanair reported a post-tax profit of €1.61 billion for the quarter ending in September, a 6% decrease compared to the same period last year, while passenger numbers rose by 5% to 64.5 million.
To help mitigate the impact of higher fuel costs, Ryanair plans to introduce Boeing 737 MAX 10 aircraft starting in January. These new aircraft are expected to offer around 20% more seating capacity while consuming approximately 20% less fuel than the current fleet, potentially aiding in reducing operating costs.