Ryanair has prepared for an “armageddon situation” amid the jet fuel crisis, the budget airline’s chief financial officer told CNBC on Monday.
“Do we have plans for some sort of Armageddon situation? Of course we do, but I don’t think it’s going to happen. As it stands, we’re running a full schedule this summer and planning to run a full schedule over the winter period,” Neil Sorahan told CNBC. Ritika Gupta in an interview.
“I think we’ll see some of the weaker carriers, which were already struggling before the war, hit the wall this winter,” Sorahan said.
Shares were down 3.3% in early trading Monday after the airline reported its full-year results.
The carrier hedged 80% of its summer fuel at $668 per metric ton, citing “economic uncertainty” caused by the Middle East conflict and the ongoing blockade of the Strait of Hormuz. The 20% unhedged fuel has “climbed” due to price volatility. Sorahan said the airline was “not planning any cancellations.”
He told CNBC that he would not be surprised this winter to see some European airlines “get into trouble,” in a scenario similar to that of Spirit Airlines in the United States The airline collapsed after the jet fuel crisis which was added to its long-standing problemsincluding heavy debt and rising costs.
“We’re obviously in very volatile oil markets right now. If we go back to a few months ago, we probably had concerns about oil supply, but we’re increasingly confident that there won’t be any oil-related issues this summer,” Sorahan said.
He explained that Ryanair was not “too concerned” about jet fuel supplies as Europe’s dependence on the Strait of Hormuz is declining, with suppliers now sourcing oil from the United States, Venezuela and Brazil among others.
“That said, I think prices will remain high for longer, which puts Ryanair in a particularly strong position, given our strong fuel hedge,” Sorahan said.
Michael O’Leary, CEO of Ryanair predicted “real failures” for other airlines if the price of jet fuel remained high, in a conversation with CNBC in April.
“I think there will be failures,” O’Leary said. “If oil continues at $150 a barrel through July, August and September, then you will see European airlines going bankrupt and that, in the medium term, would probably be good for Ryanair’s business.”
How did Ryanair perform in terms of profits?Ryanair reported a 40% rise in after-tax profit to almost 2.3 billion euros ($2.7 billion) in the financial year ended March, while passenger traffic rose 4% to 208.4 million. At the same time, its turnover fell by 11% to 15.54 billion euros.
While it initially expected summer rates to rise slightly, it now expects them to remain broadly stable, with the final outcome dependent on last-minute bookings during peak periods. The airline said there had been an increase in late bookings, which reduced visibility.
Although Ryanair has no plans to include a fuel surcharge, Sorahan told CNBC: “We have not promised any price increases. Ryanair operates a passive active load efficiency strategy, which means we set the price to fill the planes, and consumers largely decide what that price will be.” He added that 700 million people every night book flights with Ryanair.
As holidaymakers in Europe and the UK face continued uncertainty around the jet fuel crisis, many are now I plan to travel by train this summer or take short-haul flights, with Southern Europe believed to be the preferred destination.
