Ryanair quarterly profit drops on fuel and fare cuts

Ryanair reports a sharp fall in quarterly profit as higher fuel costs and softer fares collide with a travel market shaped by the Iran conflict. The airline said pre-tax profit fell 34% to €593 million in the April-to-June period, while revenue rose 1% to €4.4 billion and fares were down 6% after price cuts to stimulate demand, according to the BBC.

The numbers show how quickly geopolitics turns into a line item for consumer-facing firms. Jet fuel prices have risen since the US and Israel launched strikes against Iran in February, and Ryanair says the portion of fuel it has not hedged has become dramatically more expensive. At the same time, the company describes passengers as more hesitant, booking closer to departure than normal even as popular Mediterranean routes remain full.

Ryanair is not alone in facing cost shocks, but its model makes the trade-offs unusually visible. A low-fare carrier can fill seats by cutting ticket prices, yet the margin it gives up is the same margin it needs to absorb volatility in fuel and disruption in air corridors. Ryanair says it has hedged most future fuel costs, but warns its full-year results remain highly sensitive to any escalation in the Middle East or Ukraine and to the price of unhedged jet fuel.

The wider supply chain is also in play. The BBC notes that traffic through the Strait of Hormuz has ground to a halt, and that an interim peace deal last month briefly eased energy prices before renewed fighting pushed them up again. For airlines, the route map and the fuel bill are linked: when shipping slows and crude prices jump, the cost of moving people rises even if demand does not.

Investors responded in kind. Ryanair’s share price fell 5% on Monday, with AJ Bell’s Russ Mould telling the BBC that the airline is better positioned than many rivals but that visibility is poor in the current environment.

Ryanair still carried more passengers year-on-year in the quarter, but it did so while selling cheaper tickets into a market where the fuel hedge does not cover everything.