Fuel-hedge chicken is a game only Ryanair can play

Ryanair Holdings

10/06/2026 11:29

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Oliver Taslic

    LONDON, June 10 (Reuters Breakingviews) - Since the Iran war sharply pushed up jet fuel prices, Europe’s airlines have been touting their decision to “hedge” purchases – meaning locking in costs in advance. That’s helped them offer an essentially normal service this summer. The larger question is how they’re thinking about next year: locking in 2027 prices now can only be done at pricey levels, but not doing so leaves carriers exposed to an impossible-to-predict situation. Ryanair RYA.I may be the only airline that can afford to sit tight.
Unlike in the U.S., where airlines try to simply pass on elevated costs through higher fares, fuel hedging is popular in Europe. The continent’s “Big 6” – Ryanair, easyJet EZJ.L, Wizz Air WIZZ.L, Air France-KLM AIRF.PA, Deutsche Lufthansa LHAG.DE and British Airways owner IAG ICAG.L – all entered the crisis with significant amounts of cover. For example, easyJet said last month that 72% of its fuel for the six months to end-September had been hedged at $726 a metric ton, compared to a spot price on Wednesday of around $1,100.
Recent earnings calls outlined different strategies for further down the line. On one end of the spectrum, the chief financial officer of IAG told analysts that it was “really just continuing with the kind of existing policy that we have”. On the other, Ryanair CEO Michael O’Leary said he was prepared to wait until “September, October” before doing any hedging for next summer. Air France-KLM, Lufthansa, easyJet and Wizz have all reported having hedging in place beyond their current financial years – though some of that was organised pre-war.
When it comes to European jet fuel, derivatives markets can get pretty niche, so sometimes it’s lack of liquidity that pushes carriers not to hedge. But this isn’t the case this time, Citi analysts noted. Rather, it's Ryanair's choice to be bold: if the cost of jet fuel goes down, it can win big. Crucially, if it instead goes up, it can endure being wrong. On top of being “effectively debt free” after recently repaying its last outstanding bond, the Irish carrier has reported an average operating margin of over 15% over the past decade, excluding the pandemic years, in a sector that often gets by on single digits.
Of course, IAG has high operating margins too – 15% last year. But it makes less sense for a network carrier to wager on fuel prices when it may more easily be able to pass higher costs on to its premium and corporate customers. Ryanair’s advantage is that analysts expect it to deliver over €4 billion of cumulative operating profit in its current and next financial years, according to forecasts compiled by Visible Alpha, whereas low-cost competitors easyJet and Wizz are only expected to generate around €700 million and €100 million, respectively. If the conflict in the Middle East fails to ebb, the Irish group could find that the sour taste of higher unhedged fuel costs is easily washed down by taking market share from its weaker rivals.
     
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CONTEXT NEWS
The International Air Transport Association on June 7 slashed its forecasts for the global airline industry following the outbreak of the Iran war.
IATA said it now expects traffic growth of 2.1% in 2026, compared to 4.9% in its December forecast. The industry’s net profit is expected to reach $23 billion, down from $41 billion previously.

(Editing by Jon Sindreu; Production by Streisand Neto)
((For previous columns by the author, Reuters customers can click on TASLIC/oliver.taslic@thomsonreuters.com))