The ongoing conflict in the Middle East is poised to have significant repercussions on the European aviation industry, with airfares potentially rising by up to 20% in 2027, warns Ryanair CEO Michael O’Leary. The increase in jet fuel costs is a primary concern, as it could lead to higher operating expenses, putting financial strain on airlines and raising the risk of bankruptcies and consolidation within the industry.
O’Leary anticipates an unusually sharp increase in ticket prices over the next year as airlines grapple with the burden of escalating fuel bills. Jet fuel comprises a substantial portion of airline operating costs, and persistent price hikes may severely impact profitability. Although Ryanair has hedged around 80% of its 2026 fuel needs at $67 per barrel, it has limited protection against fuel price surges from April 2027 onward, with only 15% of its 2027 requirements hedged at $85 per barrel.
This leaves Ryanair and other European carriers significantly exposed to market fluctuations in fuel prices. EasyJet, another major player in the European market, is also feeling the pressure of rising fuel costs and has announced plans to scale back its winter schedule to cut expenses. The airline has secured some fuel-price protection for 2027, but like Ryanair, it remains vulnerable to further increases.
In addition to fuel concerns, Ryanair is adjusting its operations in response to external economic pressures. The airline plans to reduce its presence in Belgium, cutting 20 routes and more than a million seats from its winter schedule after the country announced an increase in aviation tax from €2 to €7 starting January.
The outlook for the aviation industry is concerning for both airlines and travelers. While airlines may resort to increasing ticket prices to mitigate rising costs, there is uncertainty about how long passengers will be willing or able to pay for more expensive air travel. These challenges underscore the broader financial instability facing the European aviation sector in the coming years.