Ryanair Shares Slide as First-Quarter Profit Drops 34% Due to Increasing Fuel Costs

Ryanair’s profit after tax fell 34% to €538m in the June quarter as the Middle East conflict pushed fuel costs higher and forced fares down 6%.

Europe’s largest budget airline reported the drop on Monday, and markets responded by sending its shares lower in early trading, one of the sharpest one-day falls the stock has seen this year.

Shares in Ryanair Holdings,  listed on Euronext Dublin, fell as much as 7.6% to an intraday low of €23.99 before recovering slightly to trade around €24.08, down 7.2% on the session as of late morning. The stock had closed at €25.96 on Friday. Shares have traded between €21.12 and roughly €29.94 over the past year, meaning Monday’s fall takes the stock back toward the lower end of that range.

Fuel costs double as fares slide

Ryanair Holdings Plc (LSE:OA2U) said profit after tax fell to €538m for the three months to the end of June, down from €820m a year earlier, even as passenger numbers rose 6% to 61.3 million and load factor held at 94%. Revenue rose only 1% to €4.38bn because average fares fell 6%, requiring “stimulation” as the Middle East conflict caused what the company called consumer hesitancy, concerns about EU jet-fuel shortages and later bookings. Operating costs rose 11% to €3.81bn as prices for its unhedged jet fuel, around a fifth of its total fuel needs, more than doubled during the quarter.

The company had already flagged fuel-price risk when it reported a 35% rise in annual profit in May, when CEO Michael O’Leary said it was “far too early” to give full-year guidance because of the conflict. Monday’s results mark the second consecutive Ryanair earnings update in which the war has weighed directly on the numbers, moving from a cautionary footnote in May to an actual 34% profit hit in July.

Ryanair is 80% hedged on jet fuel through to March 2027 at around $67 a barrel, and has extended hedging into the following year, now 15% covered at about $85 a barrel. The group repaid its final €1.2bn bond in May and says it is now debt-free, while it is roughly 90% through a €750m share buyback, having repurchased more than 25 million shares at an average price of €26.35.

The conflict, which has driven jet fuel prices sharply higher across Europe this year, has hit smaller, less-hedged carriers hardest. O’Leary said Ryanair’s hedging policy gives it a “cost advantage over all other EU competitors” and warned that “unprofitable airlines face a difficult winter.”

John Strickland, an aviation analyst at JLS Consulting, told CNBC that anxious travellers had forced Ryanair to lower fares even as traffic grew, meaning revenue still took a hit despite higher passenger numbers. Analysts carry an average price target of around €30.47 on the stock, implying broad confidence in a recovery from Monday’s levels once fuel volatility eases.

Ryanair gave no profit guidance for the year ahead, saying it has “zero H2 visibility” and that the outcome depends heavily on close-in bookings in August and September. Fares for the current quarter are trending modestly lower than last year. With traffic still on track to grow 4% to 216 million passengers this year, the key question for markets is whether Ryanair’s low-cost, well-hedged model can keep widening its advantage while weaker rivals face a genuinely difficult winter.