Ryanair Group CEO Michael O’Leary on jet fuel crisis: Expect airline bankruptcies in Europe

Good morning, Jill. I don't feel qualified to fill Becky's seat here, but I'll do my best.

Certainly not as well. Actually, we can't say things like that anymore. You look great. I find you very attractive. How bad is this likely to get in terms of jet fuel?

I don't think it's bad at all. I mean, we've just announced record full-year results. So we carried 208 million passengers. We declared a profit of 2.26 billion. Oil prices have spiked hugely, but we're very well hedged. We're 80% hedged out to March 27th at $67 a barrel. The spot price today on jet is about $150 a barrel. So we're in great shape.

Probably. Yeah, we hedge all along. Generally speaking, it's the advantage of having a strong balance sheet. So we're in pretty good shape. Our competitors are in real trouble. Most of them already hedged till the end of September. And the risk in Europe, though, is they were worried in the last couple of months they'd have supply disruptions. So they get some of their oil from the Middle East. Most of that has switched to supplies coming from the Americas, Norway, West Africa. So the risk of fuel disruption has gone away. But much higher oil prices are going to be a real challenge through the remainder of this summer in Europe. But thankfully, Ryanair, because of our hedging, we should be in pretty good shape.

Andrew, well, they're already canceling flights and we've seen a lot of competitors take 5-6% of capacity out in April, May, and June. I mean, I think if oil prices remain up at these levels, if the Strait of Hormuz remains closed until, say, September or October, there's going to be airline bankruptcies in Europe. Like you had Spirit over here in the States, we have airlines over there that are in the same kind of poor shape. They have low fares but high costs. And if they can't make money, I mean, I don't think anybody really believes this is going to continue on to the end of the summer. You have Memorial Day coming up here at the end of May. The midterms are kicking off. You know, I think the administration is going to have to declare a win and get the hell out of there.

It's pan-European, Joe. I mean, we have spent the last 20 years taxing the hell out of European air travel. You know, we have an environmental tax about €77 a ticket now on all, only on intra-European flights.

Oh, you're saving the planet and the hedgehogs and whatever else it was. But we exempt all the long-haul flights. So the Americans, the Chinese, the Gulf carriers are all exempt. We're just taxing the hell out of the poor dumb Europeans going on their two-week holidays to Spain, Portugal, Italy, and Greece. The airlines across Europe are calling for an abolition of that ETS. It is the dumbest taxation known in humankind. Ursula von der Leyen, who's the—I call her useless—she's the President of the European Commission.

Useless von der Leyen. She's been talking about making Europe more competitive for about the last two years. Of course, she hasn't had an idea, no initiative. She should start by abolishing environmental taxes on air travel. The Swedes now get it. The home of Greta Thunberg, flight shaming. They've abolished the aviation tax and we're growing very strongly in Sweden. Europe needs to do likewise.

I don't think much is the leadership. I mean, it's just the...

I mean, Italy, political issues, you know, look, we all want an early solution to the strait. You know, it would have helped, I think, if the administration here had consulted more with the Europeans before they went in. Right. You know, but it is in everybody's interest to get the Straits of Hormuz reopened. Europe's jet fuel doesn't come from the Middle East. So we're in that sense. But high oil prices is not in the US, it's not good for the US economy, it's not good for the European economy. We need to get this thing fixed. I mean, I disagree with Trump on tariffs. I fundamentally disagree with Trump on a few things. But one thing he's right on is Europe has been weak on defense spending. NATO needs to significantly up its game on defense spending. The only way Europe can fund that is by getting to a much more competitive economy and taxing things like low-fare air travel is not the way you get to a competitive—you're just taxing ourselves.

Again, as you know, it depends on how long this goes on. I mean, if oil stays at $150 a barrel, you know, through to September, through to the end of this calendar year, we're all going into recession. The US, Europe, everybody. I would be more optimistic. I think it will, you know, there will be an end brought to the war or the straits will reopen. Oil prices will trend back downwards again. I think by the time we get to the end of the summer. But what the hell do I know? I'm only some dumb schmuck working for an airline.

Well, funnily enough, because we're coming into the peak travel season in Europe. So, you know, we're seeing there's a little bit of nervousness out there into June, July, and August. We're having to price a little bit down to keep bookings going. But close-in is very strong.

I mean, it is a similar story. I mean, one of the things, one of the fundamental differences in Europe and the US is we have much lower-cost carriers across the board. We wipe the floor with Southwest over here. I mean, our cost per seat is about $40, Southwest cost per seat about $120. So we're much lower cost.

It's an efficiency, bigger aircraft, gauge type. We just generally, we don't distribute through travel agents. We're just much more ruthless about being lower cost. But there is a similar story with the legacy carriers in Europe, because the Gulf guys are all grounded. The legacy guys are taking all the connecting traffic going to Asia, going to the US. I mean, the Gulf carriers are in real trouble. I mean, essentially they're grounded. The Lufthansas, the BAs, the Air Frances are taking all that big long-haul connecting and that is pricing up. So they're doing very well on the long-haul stuff. But on the short-haul piece, Ryanair is wiping the floor with everybody because we have such a cost advantage. We're so well hedged. We will pay down the last of our bond. I have a 1.2 billion bond we pay down next week. I'm completely debt-free now with a fleet of 650 aircraft. So we're still growing very strongly in Europe. But there's lots of flaky, low-fare but not-so-low-cost carriers like the Spirits. There's a few of those in Europe.

There's not that much anymore in Europe, Andrew. I mean, Europe is inexorably migrating towards four large carriers. You have over here United, Delta, and American. Then you have Southwest, the big low-cost carrier. Europe is going the same way. So you have the three big legacy carriers, the BA family, the Air France-KLM, and Lufthansa. And then Ryanair is going to be the kind of big, dominant, low-cost carrier. And the other guys who are stuck in the middle, the Jets, the Whizzes, the Baltic Airs are either going to get taken out, or which I think there'll be M&A, or they'll fail. Okay. And that's inevitable. So Europe, it runs about ten years behind the US. The US had the first, the kind of, were the first to deregulate. One of the few economic policies that Carter was successful with. Europe copied that US success. But we're coming to the end of that now, and therefore we're going to fundamentally be the only low-cost carrier in Europe. But the good news is we've ordered 300 aircraft from Boeing, the MAX 10s, which we hope to take first delivery of in the spring of '27. That gives us growth to go from 200 million to 300 million passengers a year over...