Ryanair stock slides 6% as higher fuel costs amid Iran war dent profit

Ryanair warned on Monday that struggling European airlines are facing a "difficult winter" ahead, as the budget carrier reported first-quarter profit that took a 34% hit due to consumers delaying bookings amid the Middle East crisis

The airline saw its profit after tax in the April to June quarter fall to 538 million euros ($615.3 million), down from 820 million euros the previous year.

Ryanair said 20% of its unhedged fuel was exposed to price spikes, while ticket fares declined 6%. Operating costs also rose 11% to 3.81 billion euros as the price of its 20% unhedged fuel more than doubled in the quarter.

Shares fell 5.6% shortly after the market open.

The company's jet fuel for 2027 is currently 80% hedged at $67 per barrel, and 15% hedged for 2028 at $85 per barrel.

"Q1 fares (which benefitted from a full Easter during April 2025) required stimulation as the Middle East conflict led to consumer hesitancy, concerns about EU jet-fuel shortages, economic uncertainty and later bookings," Ryanair CEO Michael O'Leary, said.

O'Leary added that the company's "conservative hedging policy" insulates it from the volatility of oil prices as the Middle East turmoil continues, giving it a "cost advantage over all other EU competitors," while "unprofitable airlines face a difficult winter."

Travelers were anxious to book their summer holidays at the onset of the war, forcing Ryanair to lower fares, which means despite increased traffic, revenue still took a hit, John Strickland, aviation analyst and director of JLS Consulting, told CNBC's "Squawk Box Europe" on Monday.

Ryanair issued conservative guidance for the rest of its financial year, with operating costs highly dependent on the price of its unhedged jet fuel. Meanwhile, profit after tax remains "highly sensitive" to adverse geopolitical developments, including escalating conflict in the Middle East and Ukraine, the company said.

"Despite a recent, slight uptick in volumes, and less price stimulation, Q2 pricing is trending modestly down (y-o-y), and the final H1 fare outcome is heavily dependent on the strength of close-in bookings in Aug. and Sept," O'Leary said. "As is normal this early in the year, we have zero H2 visibility, so it remains far too early to provide any meaningful FY27 PAT guidance."

Ryanair's O'Leary told CNBC in April that if the price of jet fuel continues to remain elevated, its competitors will see "failures."

The average price of jet fuel has surged to $127 per barrel for the week ending 10 July, up 41% from the prior year, per the International Air Travel Association's Jet Fuel Price Monitor.

At the time, the International Energy Agency warned that Europe could run out of jet fuel in a matter of weeks, as the majority of its jet fuel imports came from the Middle East. The region has had to look to international markets to secure alternative supply.

"If pricing stays higher for longer this summer, we think a number of our airline competitors in Europe are going to face real financial difficulties," O'Leary told CNBC's Ben Boulos at the Norges Bank Investment Management Conference in Oslo in May.

JLS' Strickland noted that a few smaller airlines have failed in recent weeks, with winter bringing even greater pressures from failures to cancelations.

"I would expect to see much more severe cancelations in the weaker winter season this year than we've seen for a long time across a whole range of airlines if fuel prices stay high."

O'Leary said at the time: "We can guarantee people there'll be no price increases, no fuel hedging, no fuel surge levy surcharges, regardless of what happens to summer supply," he added.

Strickland said the company benefits from a "load factor active revenue passive approach," which means selling seats at marginally low rates, while expecting passengers to spend on additional services.

"Of course, any passenger in a seat, even if the actual ticket price is low, they'll spend something, maybe just a cup of coffee on board, but it could well be an extra bag, or buying a rental car through Ryanair. So that's a massive driver, around about 20- 25% or so of the company's total revenues," Strickland said.