Ryanair lost a third of its profits due to the war in the Middle East. Its stock plummeted 7%.

Shares of Ryanair, Europe’s largest airline by passenger volume, plummeted nearly 7% during trading on July 20 in Dublin. This was the sharpest decline since mid-April. Later, the shares recovered some of their losses, closing down about 5%.

The sell-off was triggered by a 34% drop in the low-cost carrier’s quarterly profit, due to rising fuel costs and lower ticket prices amid the conflict in the Middle East. Ryanair’s weak results—as the first of Europe’s aviation giants to report quarterly earnings—clearly illustrate how the region’s aviation industry is coping with the Iranian crisis, Reuters notes.

The Irish low-cost carrier’s net profit for the first fiscal quarter, which ended on June 30, was €538 million after taxes. The result disappointed the market: analysts surveyed by Reuters had forecast a profit of €579 million, while the Bloomberg consensus estimate was as high as €624 million.

The company attributed the decline to the conflict in the Middle East: rising fuel prices caused by the blockade of the Strait of Hormuz, as well as a 6% drop in airfares, which are likely to remain at that level throughout the key summer period amid renewed consumer concerns over the latest escalation.

Operating expenses rose sharply, the carrier reported: the volume of unhedged fuel more than doubled in the last quarter. The price of jet fuel is currently fixed at $67 per barrel for 80% of volumes through March 2027. Total annual costs will depend on the price of the remaining 20% over the next three quarters.

Due to uncertain prospects for the second half of the year, the carrier refrained from providing a full-year profit forecast. According to Ryanair CEO Michael O’Leary, airfare trends in the current quarter are pointing toward a moderate decline, despite a recent surge in bookings. Future fares will depend on passenger demand in August and September. “We are well-positioned for a profitable year, but it’s too early to give specific figures,” confirmed CFO Neil Sorahan.

He added, however, that Ryanair had not seen a drop in demand due to the abnormal heatwave in Europe: “We fly to the Mediterranean and Greece every day at 100 percent capacity. People still want to go on vacation just as much, even if they’re booking their tickets a little later.”

In the longer term, the capacity of European airlines on short- and medium-haul flights will remain limited “at least until 2030,” the company predicts. This is due to a global shortage of Boeing and Airbus aircraft, as well as technical issues with engines, which have grounded part of the regional fleet. According to Sorahan, the capacity shortage will be exacerbated by an upcoming wave of consolidation and bankruptcies, but this will ultimately support ticket prices. “I wouldn’t be surprised if we see a number of bankruptcies this winter—several players are literally on the brink right now,” said the low-cost carrier’s CFO.

Bloomberg notes that the sale of easyJet’s British competitor—which is currently the subject of a bidding war among U.S. investors—could trigger a “domino effect” and lead to consolidation in the airline industry.

Ryanair plans to focus its spending on expanding its fleet of Boeing 737 Max 10 aircraft, paying dividends to shareholders, and completing its share buyback program. At the same time, the company intends to restore its cash balance to €4 billion.

Ryanair's stock has fallen by about 12% since the beginning of the year, while it rose 55% over the past year.

16 out of 19 analysts covering the Irish carrier's stock recommend buying it. Three maintain a neutral outlook. There are no sell recommendations.

This article was AI-translated and verified by a human editor