Irish low-cost airline Ryanair reported a 34% decline in net profit for its first quarter, attributing the drop to the Middle East conflict, which led to soaring jet-fuel prices and reduced ticket sales. The profit after tax fell to 538 million euros ($616 million) for the three months ending June, down from 820 million euros a year earlier. The airline cited the rising cost of unhedged jet-fuel and consumer hesitancy due to the conflict as major factors impacting its financial performance.
Rising Fuel Costs and Reduced Fares
Ryanair's operating costs increased by 11% to 3.81 billion euros, driven by a more than doubling of the price of its 20% unhedged jet-fuel. Despite a 6% growth in passenger traffic, fares dropped by the same percentage. CEO Michael O'Leary noted that the Middle East conflict caused consumer hesitancy, leading to concerns about EU jet-fuel shortages, economic uncertainty, and later bookings.
Future Outlook and Sensitivities
O'Leary warned that Ryanair's net profit for the remainder of the financial year remains highly sensitive to several factors, including conflict escalation in the Middle East and Ukraine, the price of unhedged jet-fuel, macroeconomic shocks, and European air traffic control strikes. The airline's financial health is closely tied to the geopolitical and economic developments in these regions.
