Ryanair's $67 bet is the only thing standing between cheap flights and an airline collapse

by Luís Rijo 9 min read
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Today, Ryanair announced a record €2.26 billion profit. Its share price fell.

That is the kind of result that only makes sense in aviation. Investors looked at the Middle East, saw a war, saw a strait still partly closed, saw jet fuel trading at over $150 a barrel - and decided that whatever happened last year is irrelevant to what is about to happen. The airline's stock slid even as Michael O'Leary sat on Bloomberg Television to announce the best full-year numbers in the company's history.

But O'Leary was not there to complain about share prices. He was there to explain why Ryanair is not just surviving the biggest fuel supply crisis in European aviation history - it is using it. Because Ryanair made a single financial decision that now separates it from almost every rival on the continent: it bought 80% of its jet fuel in advance, at $67 a barrel, locked through to March 2027.

The market price today is more than double that. And the gap between those two numbers - $67 versus $150 - is fast becoming the difference between profit and bankruptcy across European skies.

The background

Fuel is the single largest operating cost for any airline. It typically accounts for between a quarter and a third of total expenses, which is why airline economics are so tightly bound to oil markets. When the price of a barrel of crude moves, it moves faster than ticket prices can be adjusted, faster than routes can be cut, faster than staffing can be trimmed. Airlines absorb the shock first, and pass it on second.

To protect against that volatility, airlines use a tool called fuel hedging - a contract that locks in the price of jet fuel at a fixed rate for a set period in the future. Think of it like agreeing today to pay your gas station $1.50 a litre for the next 12 months, regardless of what happens to oil prices. If prices rise, you win. If prices fall, you overpaid. It is an insurance policy, not a trading strategy.

Most European airlines hedge some portion of their fuel - but how much, at what price, and for how long varies enormously. Those differences barely matter in calm markets. In a crisis, they determine who survives.

The crisis that arrived in early 2026 was not subtle. US-Israeli military strikes on Iran in late February triggered what the head of the International Energy Agency called the greatest global energy security challenge in history. Iran responded by closing the Strait of Hormuz - the narrow waterway between Iran and Oman through which around 20% of the world's oil trade normally flows. For Europe specifically, the consequences were acute: the strait had previously supplied roughly 40% of the region's jet fuel imports, a flow that stopped almost immediately.

Within weeks, jet fuel spot prices - the cost of buying fuel on the open market without a prior contract - spiked from around $74 a barrel to over $150. The IEA warned in April that Europe had replaced just over half of the lost supply from the Middle East, and that physical shortages could emerge at European airports by June if the strait stayed closed. Airports Council International Europe wrote directly to the European Commission, warning that fuel stocks could fall to critical levels within three weeks.

That is the world Ryanair's annual results landed into today.

What is actually happening

O'Leary described the situation with characteristic bluntness in the Bloomberg interview: Ryanair is in great shape on fuel. Its competitors are not.

The airline's full-year results for the period ending March 2026 show profit after tax up 40% to €2.26 billion, revenue up 11% to €15.54 billion, and passengers up 4% to 208.4 million - the highest totals in the airline's history. Fares rose 10% year-on-year, recovering most of the 7% decline posted the year before. The load factor - the share of seats filled per flight - held at 94%, which is extraordinarily high for a network of this scale.

The profit figure excludes an €85 million provision for an Italian competition fine, which O'Leary indicated will likely be overturned. On a reported basis, net income reached €2.17 billion.

None of that, however, captures what Ryanair actually announced. The real story is not the numbers that came in. It is the numbers that are coming.

O'Leary told Bloomberg he expects the Strait of Hormuz to stay closed for an unknown period - possibly until the end of summer, possibly longer. If it remains closed through to March 2027, he said, his own unit costs might rise by mid single-digit percentages on the unhedged 20% of fuel Ryanair must still buy at market prices. Ryanair said it spent $50 million extra in fuel in April alone, and at sustained $150 prices, that would compound to roughly $600 million in additional annual costs.

That is painful. For Ryanair. For airlines without equivalent hedges, the same scenario is existential.

Spot jet fuel prices have surged above $150 a barrel - more than double the pre-conflict level of $74. Lufthansa has said the fuel shock will cost it an additional $2 billion this year, and has already removed 20,000 short-haul flights from its European summer schedule. Air France-KLM expects its fuel bill to jump by $2.4 billion, with $1.1 billion of that landing in the second quarter alone. These are carriers with far deeper pockets than the budget operators O'Leary is most focused on.

Asked directly on Bloomberg whether Europe will run out of jet fuel, O'Leary said simply: it won't. He had met with Ryanair's fuel suppliers in Paris the previous week. Supply through to September was confirmed. Most of Europe's jet fuel, he noted, now comes from West Africa, the Americas, Norway - and, since the partial lifting of sanctions, Russia is again supplying Eastern European countries. One pressure point remains: in the UK, the Kuwaiti state-owned supplier Kuwait Petroleum holds around 30% market share at several major airports and had been struggling to reroute supply. O'Leary said even that problem was being resolved.

The money trail

The hedging gap across the European airline industry is the central economic fact of this crisis - and it is wide.

Ryanair is 80% hedged at $67 a barrel through April 2027. Wizz Air, the Hungarian ultra-low-cost carrier, had hedged approximately 55% of its full-year fuel needs - better for the near term, where it has around 70% coverage for summer at roughly $700 per metric ton, but leaving it considerably more exposed as the year progresses. Air Baltic, the Latvian flag carrier, is in a more precarious position still: Latvia's parliament recently approved a €30 million emergency loan to keep the airline running from June through August, with repayment due in August. O'Leary, without visible concern for diplomatic niceties, called that repayment deadline largely fictional.

In the Bloomberg interview, O'Leary named Wizz Air and Air Baltic as the carriers most likely to fail if fuel stays elevated - a prediction he has been making publicly for weeks. He told Italian newspaper Il Sole 24 Ore that two or three European airlines could go bankrupt in October or November, and added, with some relish, that the result would be "a good thing for our business, because there will be fewer competitors."

Wizz Air fired back. The airline called O'Leary's claims "flatly untrue and false," pointed to its €2.1 billion cash position, and noted that it funds aircraft purchases 18 months in advance. Its CEO, József Váradi, took the same line at the CAPA Airline Leaders Summit: airlines don't go bankrupt because they're unprofitable - they go bankrupt because they run out of cash. "We're starting with €2 billion," he said.

The dispute, though fought in press releases and conference presentations, is really a bet on duration. If the strait reopens before summer ends and prices fall back below $100 a barrel, Wizz Air's position holds. If the closure extends through autumn - O'Leary's implied scenario - then the arithmetic turns ugly for any carrier with a large unhedged book.

This is also why Ryanair's share price fell today despite record profits. Investors are not pricing the year that ended. They are pricing the year ahead, with no fuel guidance possible and a war still running. Ryanair declined to issue profit guidance for the 2026-27 fiscal year entirely, citing "zero H2 visibility." The airline that knows more about its fuel costs than almost anyone else on the continent still cannot say what it will earn.

There is one more layer. O'Leary's Boeing deal - 300 MAX-10 aircraft, priced during the COVID-19 pandemic when aircraft orders collapsed - burns 20% less fuel per seat than the planes it replaces and carries 20% more passengers. The first 15 are due in spring 2027. At $150 fuel, every percentage point of fuel efficiency is worth real money. Ryanair bought those aircraft cheap. It locked in its fuel cheap. It has the cash to wait out competitors who did neither.

What people are doing about it

European governments are treating the fuel supply problem differently than the fuel price problem - because they can actually do something about the first one.

Spain's Ministry of Ecological Transition confirmed the country has jet fuel reserves through August. France's TotalEnergies, one of Europe's largest fuel suppliers, has warned that if Gulf supplies remain blocked in June it would not be able to supply all of its customers - an admission that prompted accelerated sourcing from alternative origins. The UK and France are leading a 30-nation military coalition pushing to reopen the strait, though no timeline has been set.

Airlines themselves are absorbing costs through capacity reduction. Lufthansa already removed 20,000 short-haul flights this summer. Wizz Air is suspending Middle East operations from September and refocusing on Central and Eastern European routes where it dominates - a defensive posture that preserves cash at the expense of growth. Ryanair has reallocated its constrained capacity toward markets that have cut aviation taxes, including Albania, Italy, Morocco, Slovakia, and Sweden, and away from what O'Leary calls "uncompetitive high-tax markets" like Austria, Belgium, and Germany.

For passengers, the calculus is shifting in real time. European summer bookings remain strong, according to Ryanair - but customers are booking later, closer to departure, as uncertainty over flight schedules and fuel surcharges makes advance planning feel risky. Long-haul travel, particularly to and from the Middle East and via Gulf carriers, has contracted sharply. O'Leary predicted that Europeans who would typically have used Emirates or Qatar Airways to connect to long-haul destinations will instead holiday within Europe this summer - in Portugal, Spain, Italy, Greece.

That shift in demand - away from long-haul and toward intra-European short-haul - benefits Ryanair directly. It is the market where the airline has no serious low-cost competition, and where it now holds a structural fuel cost advantage over every remaining rival.

The bottom line

Ryanair reported its best year ever today, and the story is not really about last year. It is about the next 12 months - specifically, about what happens when an airline that hedged 80% of its fuel at $67 a barrel competes against carriers buying at $150. The Strait of Hormuz has turned a normal pricing advantage into something more fundamental. O'Leary's prediction is not that Ryanair will win. It is that some competitors simply will not be there by the time winter bookings open.

Timeline

Summary

Who: Ryanair CEO Michael O'Leary, speaking on Bloomberg Television; also Wizz Air, Air Baltic, Lufthansa, and Air France-KLM as affected European carriers

What: Ryanair reported record annual profits of €2.26 billion while O'Leary argued that the same fuel crisis damaging rivals has left Ryanair structurally advantaged - because the airline hedged 80% of its jet fuel at $67 a barrel before the Iran war sent prices above $150

When: Full-year results released today, May 18, 2026; the underlying fuel crisis began in late February 2026 with US-Israeli strikes on Iran

Where: The crisis centres on the Strait of Hormuz, the waterway through which roughly 20% of global oil trade normally flows; the airline operations in question span the European short-haul market

Why: Airlines that failed to hedge fuel at low prices before the conflict are now buying at market rates more than double what Ryanair pays - making every flight they operate more expensive and compressing margins that, for low-cost carriers operating on thin profit per seat, were already slim

Luís Rijo

Luís Rijo

Luis Rijo has spent over a decade watching money move through digital markets - where it goes, who follows it, and who gets left behind when the flow changes direction. [email protected]