Ryanair CEO Michael O'Leary Talks Fuel Prices, Higher Fares

Michael O'Leary · Ryanair

Higher aviation taxes in Belgium and the UK are pushing airline capacity to tax-free European markets.

Belgium has raised its aviation tax by 250%, from €2 to €7 a ticket, and the UK is raising air passenger duty. Ryanair is moving capacity away from these high-tax markets (the UK, Belgium, France and Germany) to countries that have no aviation tax or are abolishing it, such as Sweden, Slovakia, regional Italy, Albania and Ireland, where it sees strong growth. O'Leary expects this to pressure governments and airports to cut costs, and says high-tax states like Berlin and Paris will see continued decline. He argues there is a real move in Europe to abolish aviation taxes because they hurt tourism and growth.

“where the Belgian government has introduced this insane aviation tax. They've increased it by 250% from €2 to €7 a ticket.”at 3:43

Michael O'Leary · Ryanair

Capacity cuts and delivery delays will drive record European airfare rises from summer 2027.

Airlines are cutting capacity this winter: Ryanair is flat year on year, Air Baltic has filed for Chapter 11, and more European airline failures are expected. O'Leary expects these cuts to continue into next summer. Aircraft makers are well behind on deliveries, so European capacity will stay tight for four or five years, leaving fewer low-fare choices and less competition. O'Leary says Ryanair itself has little pricing power, but industry-wide capacity reductions will push fares up. Airlines have insulated consumers from higher oil prices through hedging for the past twelve months, and he expects those costs to be passed on from summer 2027, which is when the fare rises will show up.

“I don't think we have much pricing power. ... capacity has been taken out hugely ... you're going to see, I think record increases in airfares in Europe, in The UK from in summer twenty twenty seven onwards.”at 4:24

Michael O'Leary · Ryanair

Jet fuel crack spreads stay elevated for about twelve months even as crude prices fall.

O'Leary expects crude prices to fall once the Middle East war resolves, but says the spread between crude and jet fuel will stay high for the next twelve months. He attributes this to pressure on refineries and pressure on tankering, which keeps jet fuel expensive relative to crude. For airlines this means the cost of jet fuel stays materially above pre-crisis levels through 2027 even if crude itself eases, and he expects airlines to pass the higher costs on in higher fares.

“I think crude prices will come down, but the crack spread between the difference in crude and jet, that is going to remain elevated that we think for the next twelve months because of pressure on refineries and pressure on tankering.”at 7:35

Michael O'Leary · Ryanair

Expects the Iran war to resolve within about two quarters and the Strait of Hormuz to reopen.

O'Leary's view is that the US and Iran do not want to keep fighting over the longer term, so he expects some resolution of the war in the Middle East within about two quarters and the Strait of Hormuz to reopen. He links this to oil: he expects crude to come down, though not to the levels Ryanair has hedged at. The view is a judgement about political incentives rather than backed by specific data.

“We believe in the next probably two quarters, we'll see some resolution of the war in The Middle East. We don't believe the Americans or the Iranians want to continue it over the longer term. Straits For Muz will reopen.”at 7:35