Ryanair's profits fall by 34% due to the war in Iran

The Irish low-cost company posted sharply lower quarterly results, penalized by soaring kerosene prices and traveler caution since the start of US-Israeli strikes against Iran.

Between April and June, Ryanair recorded a pre-tax profit of €593 million, a 34% year-on-year decrease. Revenue, meanwhile, rose by only 1% to €4,4 billion, a near-stagnation achieved by reducing fares to attract hesitant passengers.

The number of passengers did increase by 6% to reach 6,1 million, driven in particular by the Easter holidays in April. However, ticket prices fell by an average of 6%, as the airline deliberately lowered its fares to offset consumer reluctance due to the conflict in the Middle East.

Since the US and Israeli strikes against Iran in February, the price of jet fuel has surged. Ryanair reports having covered some of its fuel needs through futures contracts, but purchases not covered by these arrangements have more than doubled. On Monday, crude oil briefly climbed back above $90 a barrel for the first time in a month, following a weekend marked by renewed exchanges of fire between Washington and Tehran, before retreating slightly.

The near-total closure of the Strait of Hormuz, a strategic waterway for global oil and gas supplies, is exacerbating pressure on energy prices. A provisional peace agreement reached last month had temporarily eased market pressures, but the resumption of fighting and the breakdown of negotiations have triggered a new surge.

For the summer, the airline is planning fares that are "slightly" lower than last year for the July-September period. Passengers are booking later than usual, which is complicating commercial visibility. However, Neil Sorahan, Ryanair's Chief Financial Officer, offered a more nuanced perspective: "People are still just as keen to travel, they're simply booking a little later," he said, adding that flights on Mediterranean routes were showing high load factors.

The company warns that its annual results will remain "highly sensitive" to developments in the Middle East conflict, the situation in Ukraine, and fuel prices not covered by its hedging contracts. Ryanair shares fell 5% on Monday.

Russ Mould, chief investment officer at AJ Bell, believes Ryanair remains better positioned than many of its competitors, but points out that "visibility is worse than that of San Francisco airport in fog." "The renewed escalation of hostilities in the Middle East is unfavorable, and without a lasting resolution, the difficult times for the airline industry look set to continue," he added.