(Nov 2): Ryanair Holdings plc will embark on a cost purge across its airline to help offset a €2 billion (US$2.24 billion or RM9.09 billion) increase in fuel charges next year, as the Middle East conflict continues to drive up oil prices and weighs on consumer willingness to book flights.

The airline will review airport deals, consider lowering crew staffing on planes and may increase the use of artificial intelligence to bring down expenses, it said Monday after reporting a 15% drop in profit after tax for the first fiscal half of the year.

“Everything is on the table, as we say, whether that’s pay freezes or other areas,” chief financial officer Neil Sorahan said in an interview. “I think we’re looking at a higher oil environment for possibly the next 12 months; we need to tighten our belt for the next 12 months.”

Fares in the first six months dropped as the US-Iran war triggered hesitancy among consumers and later bookings, Ryanair said. Jet fuel prices are expected to remain elevated next year, leading to significantly more expensive fares, it added.

Profit after tax for the period was €2.15 billion, down from €2.54 billion the year prior, Ryanair said. Unit costs rose 5%, unhedged fuel prices doubled to about US$130 a barrel and Ryanair no longer booked compensation for delayed aircraft deliveries.

The results come after Ryanair pared back its annual passenger target for this fiscal year and the airline said it plans to run a slimmed-down winter schedule to protect against rising oil prices. It now plans to fly 214 million passengers in fiscal year 2027, compared with the previous forecast of 216 million flyers.

For fiscal year 2028, Ryanair plans to grow traffic to more than 220 million passengers with the help of the new Boeing Co 737 Max 10s in its fleet in time for the summer season. The company said it will pay a dividend of €0.273 a share in late February 2027 and initiated another €800 million share buyback that will start that same month.

Ryanair, the largest low-cost carrier in Europe, is the first major European airline to report earnings for the quarter, setting the tone for the rest of the industry. US carriers such as Delta Air Lines Inc and American Airlines Group Inc have already cut their full-year outlooks, demonstrating how the sector is struggling to forecast results as fuel prices drive up expenses.

Shares of the Irish airline have fallen about 23% so far this year, compared with an 11% decline in the Bloomberg world airlines index. Ryanair’s decline is on par with rival Wizz Air Holdings plc. Another competitor, EasyJet plc, has increased 33% on the heels of its takeover agreement with Apollo Global Management Inc.

While Ryanair said it has zero visibility for the fourth quarter, demand for the third quarter is strong. Consumers tend to avoid long-haul flights and travel closer to home during a high-cost environment as they tighten their belts, Sorahan said.

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