Ryanair warns summer 2027 fares will rise materially as Iran war lifts oil

Ryanair has warned that airfares will rise as the Iran war pushes up oil and jet fuel prices.

Michael O'Leary, chief executive of the budget airline, said he has no doubt that airlines will have to put up fares. He said fares into the summer of 2027 are going to rise materially. He warned that some airlines could struggle to maintain capacity or even survive this winter if oil prices remain high.

At a press conference, O'Leary also attacked NATS, the government-owned air traffic control operator, over two disruptions this month that caused thousands of flight disruptions. He called its chief executive incompetent and overpaid and said he should be sacked. NATS is investigating why the faults happened and says they have since been fixed.

The warning is tied to the market price of jet fuel. Since the conflict in the Middle East began, jet fuel prices have doubled to almost $195 a barrel worldwide. Fuel accounts for about 40% of Ryanair's running costs. O'Leary said that if jet fuel remains at $140 a barrel, there will be more airline casualties this winter, meaningfully less capacity next summer, and European airfares could rise by 10% to 15%. He also predicted legacy carriers such as Lufthansa, Air France and British Airways would add fuel surcharges on short-haul flights in Europe.

The warning follows a summer in which earlier dire predictions about fuel shortages and surcharges did not fully come to pass. One airline, Air Baltic, filed for bankruptcy protection but is still flying. O'Leary's argument is that airlines bought fuel in advance this year at lower prices, so they were protected. Next year they will not be. He also said many Middle East refineries that turn crude oil into jet fuel have been damaged, so jet fuel could stay expensive even if the war ends soon. The prediction may not come to pass because it depends on what happens to jet fuel prices.

Drivers in the UK are also facing near record diesel prices. Diesel averages £1.97 per litre, according to the RAC, and some forecourts have topped £2 per litre. The increase comes as the conflict in the Middle East continues to disrupt global oil supplies.

The economic backdrop is mixed. The OECD forecasts the UK economy will grow by 1.1% this year, slightly more than the 0.9% expected. But it expects slightly weaker growth next year, reflecting resilience to the Strait of Hormuz blockage so far and an eventual hit if the conflict drags on. The OECD advised governments to contain spending and strengthen tax revenues. The head of the IMF also said governments should bring down debt. Analysts say a big fiscal judgment now hangs on how long the Iran war lasts. If it finishes in November, as suggested by Donald Trump, energy prices and interest costs could fall.