Ryanair eyes pay freezes, thinner crews and AI to absorb €2bn fuel shock

Ryanair expects its jet fuel bill to rise by about €2bn (£1.6bn) in its next financial year, ending in March 2028, and it is weighing pay freezes, lower crew ratios and a rapid expansion of AI in operations to absorb the hit. Europe's largest low-cost carrier by passenger numbers spelled out the measures as the Middle East conflict pushes oil prices to levels the industry has not budgeted for. The company also expects European airlines to raise ticket prices by as much as 20%.

For readers of this site, the notable line is buried in the middle of the announcement: AI is now on the same cost-cutting list as freezing pay and putting fewer cabin crew on each flight. That framing tells you how Ryanair's management classifies the technology — not as a growth product, but as a lever for internal efficiency when margins are squeezed.

What exactly did Ryanair announce?

The cost review covers four areas, according to chief executive Michael O'Leary:

• Airport churn negotiations — renegotiating terms at airports where Ryanair rotates or threatens to rotate capacity.
• Maturing labour agreements, which O'Leary said "may require temporary pay freezes".
• Lower crew ratios — fewer crew per flight.
• Increased use of AI.

"To help address this, we're reviewing all costs across group airlines with a particular focus on airport churn negotiations, maturing labour agreements (which may require temporary pay freezes), lower crew ratios and increased use of AI," O'Leary said in the company's statement.

The company said its increased use of AI would focus on improving productivity in operations and in back-office and support functions. That is the entire substance of the AI disclosure: two target areas, no named systems, no vendors, no headcount figures, no timeline. A caveat belongs here, as it does after every corporate AI promise: Ryanair has not said what the AI will do, what it will replace, or how much it expects to save. The claim is currently unquantified.

Why the fuel bill is jumping

The driver is the Middle East conflict. Oil prices hit a six-month high on Friday before easing to roughly $110 a barrel on Monday. Ryanair's hedging position — contracts that lock in fuel prices in advance — explains the timing of the squeeze.

Ryanair has 80% of its fuel requirements hedged at $67 a barrel through the end of March. At that level, the airline is largely insulated from the current market. The protection then collapses. For the subsequent 12 months, only 25% of requirements are hedged, at $95 a barrel — well below the roughly $110 market price.

"Unless there is a swift resolution of the Middle East conflict we expect jet fuel prices to remain elevated well into 2027," O'Leary said. "While we believe European short-haul fares will increase materially to reflect these much higher jet-fuel prices and competitor capacity reductions, this is unlikely to provide a full offset for an estimated €2bn increase in our fuel bill."

That admission is the operational core of the story: higher fares alone will not cover the gap, which is why internal cost cuts — labour, crewing, airports, AI — are on the table at all.

What happens to fares?

Ryanair expects European short-haul fares to "increase materially" next year, and it forecasts that European airlines broadly will raise ticket prices by up to 20%. The mechanics are straightforward: fuel hedges taken out by airlines across the sector expire, and the replacement contracts are far more expensive. The expiry wave turns a fuel problem into a passenger-price problem across the whole European market, not just at Ryanair.

The near-term fare picture at Ryanair itself is mixed. Average fares fell 2% year on year in the quarter ending in September. Fares in the final three months of the year were trending "modestly ahead" of the same quarter last year.

Visibility is limited, the company said. "The booking window remains closer-in which reduces visibility," Ryanair stated. "[The current quarter's] fare outcome will heavily depend on the strength of close-in October-November school midterm [holiday] and Christmas bookings."

In plain words: passengers are booking later than they used to, and Ryanair cannot yet tell whether the Christmas quarter will deliver the fares it needs.

How is the business actually performing?

The quarter ending in September produced a post-tax profit of €1.61bn, down 6% year on year but in line with analyst expectations. Passenger numbers grew 5% year on year to 64.5 million — a reminder that Ryanair's volume engine keeps running even as per-ticket pricing softens.

The tension in the numbers is clear. Profit fell 6% while traffic rose 5%, meaning the airline carried more people for less money. That is the low-fare model under strain, and it predates the fuel spike's full arrival — the €2bn increase lands in the financial year ending March 2028, after the cheap hedges run out.

Why does the AI mention matter?

For the AI industry, the significance is the role assigned to the technology. Ryanair is not proposing AI to sell more tickets, write marketing copy or build new products. It is deploying the word "AI" alongside "temporary pay freezes" and "lower crew ratios" — hard, labour-adjacent cost measures. The stated targets are productivity in operations and in back-office and support functions: scheduling, administration, the layers of an airline passengers never see.

What Ryanair did not say matters just as much. There is no figure for expected savings, no indication of whether jobs will be cut rather than merely made more productive, and no detail on whether the AI push is new spending or an acceleration of existing programs. "Increased use" is doing a lot of work in that sentence. When a company lists AI as a response to a €2bn fuel bill without attaching a number to the AI line, the honest reading is that the labour and airport measures carry the near-term weight, and the AI commitment is a direction of travel rather than a costed plan.

What comes next?

The sequence to watch runs through March, when 80% hedging at $67 a barrel expires and the 25% hedge at $95 takes over. If oil stays near $110 and the Middle East conflict remains unresolved into 2027, as O'Leary expects, Ryanair and its competitors will push through the fare increases the company forecasts — and the pressure to extract savings from crews, airports and software will intensify in step.