Ryanair’s cuts have done other airlines a favour

Europe's largest budget airline, Ryanair, has announced a reduction in its fiscal year 2027 traffic target from 216 million to 214 million passengers. This cut is primarily focused on the traditionally loss-making winter months (November to March) to limit the airline's exposure to soaring unhedged jet fuel costs, which are currently trading around $140 to $163 per barrel. Ryanair, despite having 80% of its fuel needs hedged at approximately $67 a barrel until March 2027, expects this proactive capacity reduction to cut winter losses by $81 million to $116 million (or €70 million to €100 million).

This strategic move by Ryanair is seen as "proactive management" by analysts like Davy's Stephen Furlong, who anticipates other airlines will follow suit. The airline anticipates that if high oil prices persist, short-haul airfares across Europe will "materially" increase, as some less-hedged competitors may struggle to maintain capacity or even survive the winter season. Ryanair CEO Michael O'Leary suggested that this could allow fares to recover across the industry.

While Ryanair is trimming its winter schedule, its summer demand remains robust, with August traffic rising 6% to 22.2 million passengers at a 96% load factor. The airline expects to increase summer season traffic from 138 million to 145 million, representing over 5% growth. However, the airline forecasts its annual profit to be below last year's record level. Ryanair's shares fell 2.8% in early trading following the announcement, although they later rebounded slightly, up 2.1% in Dublin.

In contrast, rival Wizz Air reported strong August passenger growth, up 26% to 8.7 million passengers, despite a slight slowdown in growth rate compared to July. Wizz Air has been pursuing an aggressive growth strategy. Ryanair's decision to cut capacity and its warning about potential airline struggles come as the industry braces for a challenging winter, with other carriers, such as British Airways owner IAG, also abandoning plans for capacity growth due to persistent high oil prices.