Ryanair Warns European Airfares Could Jump 20% as Lufthansa Cuts Its Outlook on a €9.3 Billion Fuel Bill

The era of the bargain European short-haul flight may be running out of runway. Ryanair chief executive Michael O’Leary now expects European airfares to rise by 10%, and possibly 20%, next year as the Iran war keeps jet fuel expensive, and on Tuesday Lufthansa trimmed its 2026 profit outlook as its estimated fuel bill for the year climbed to €9.3 billion. Two very different airlines, one budget and one full-service, are telling the same story: the cost of flying in Europe is about to reset, and the bill will land on travelers and the companies that send them on the road.

What Ryanair Said

Speaking on CNBC after Ryanair’s fiscal second-quarter results on Monday, O’Leary said he expects fares across Europe to climb 10% and maybe as much as 20% next year, Fortune reported. Ryanair, Europe’s largest airline by passenger traffic, said its annual fuel bill will rise by about €2 billion in the fiscal year ending March 2028.

The carrier has been better protected than most. According to Fortune, Ryanair has locked in about $67 a barrel for 80% of its fuel needs through March 2027. After that, only 25% of the following year’s needs are hedged, at roughly $95 a barrel, while Brent crude traded around $110 on Monday, up about 70% from a year earlier. O’Leary said fares would need to rise about 20%, or around €10 per passenger, to fully cover the extra fuel cost, and conceded that even that might not close the gap. The company is reviewing costs, including temporary pay freezes on labor agreements that mature in April and lower crew ratios.

Ryanair has also trimmed growth. Fortune noted it cut its passenger target for the current fiscal year from 216 million to 214 million and expects winter traffic to stay flat as it limits exposure to pricier fuel. O’Leary’s advice to travelers was blunt: book early, because waiting will mean paying more.

What Lufthansa Said

Lufthansa delivered a third-quarter operating profit of €1.4 billion, slightly ahead of a company-compiled analyst forecast of €1.37 billion, Reuters reported. But it narrowed its full-year operating profit guidance to between €1.7 billion and €2 billion, from a previous range of €1.7 billion to €2.2 billion, and put its 2026 jet fuel bill at €9.3 billion (about $10.4 billion). Total airline fuel costs rose by more than €400 million compared with last year.

Investors focused on the resilience rather than the cut, and Lufthansa shares rose more than 3% in morning trading, according to Reuters. Chief executive Carsten Spohr said rising revenues, consistently high demand and strict cost discipline had more than offset roughly half a billion euros in higher fuel costs. The group pointed to strong demand in premium cabins and on routes to Asia and North America, and said passengers keep booking closer to their travel dates at higher fares. Capacity growth for the year is expected to be flat.

Why Fares Are Heading Higher

Fuel is an airline’s second-biggest expense after labor, and the Iran war, now in its ninth month, has effectively closed the Strait of Hormuz, the route for about 20% of the world’s oil before the conflict, Fortune noted. European carriers have cushioned the blow with hedges bought before prices spiked. As those hedges roll off through 2027, airlines will be buying fuel closer to market prices, and that is when ticket prices are likely to move.

The second lever is capacity. When airlines hold seat growth flat, as both Ryanair and Lufthansa are doing, travelers end up competing for fewer seats. O’Leary argued that rivals under heavier financial pressure will have to push fares up first, letting Ryanair raise prices too while keeping its low-cost edge, and said Ryanair could hold or even widen its margins as a result.

The United States is already living this. Fortune cited Bureau of Labor Statistics data showing U.S. airfares rose 22.4% in September from a year earlier, roughly six times the overall inflation rate, and an average domestic fare of $445 in the second quarter according to the Bureau of Transportation Statistics. Major U.S. airlines dropped fuel hedging years ago, so they felt the spike immediately. Europe’s hedges have mostly delayed the same reckoning.

What It Means for Business Travel and Tourism

For companies with teams that travel in Europe, 2027 travel budgets set at this year’s prices will probably come up short. A 10% to 20% rise on short-haul fares adds up quickly across a sales team, a conference calendar or a multi-city client tour. Finance teams should consider building fare inflation into next year’s plans now rather than discovering it in quarterly expense reports.

Timing matters too. Lufthansa’s note that travelers are booking later and paying more, combined with O’Leary’s push to book early, points to a simple tactic: lock in known trips, trade shows and peak-season travel well ahead of time, and update travel policies so employees aren’t penalized for booking early. Companies with large volumes may also have more leverage now to negotiate corporate fares before hedges expire and pricing tightens.

Tourism businesses feel it from the other side. Americans made nearly 24 million trips to Europe in 2025, up 5% from the year before, according to figures cited by Fortune, and many of those visitors stitch several countries together on cheap short-haul flights. If a €50 hop becomes €60, a family itinerary with several legs gets noticeably more expensive. Hotels, tour operators and destination marketers that depend on multi-city visitors may need to sharpen package pricing or lean on rail where it competes.

For investors, the split in the numbers is telling. Premium demand and long-haul routes are carrying the network airlines, while the low-cost model is betting that its hedges and lower costs let it gain ground as rivals raise prices. How quickly fuel prices ease, if they ease at all, will decide which strategy looks smarter by the end of 2027.

The Bottom Line

Europe’s cheapest airline and one of its biggest network carriers are both signaling that fuel costs will show up in fares as hedges run out. Ryanair expects increases of 10% to 20% next year, and Lufthansa has already shaved its profit outlook despite strong demand. Travelers and businesses that plan and book early will be best placed to soften the hit.

Sources: Fortune; Reuters via Investing.com.

Edited by Coron @QUE.COM
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