Ryanair is lowering summer air fares in an effort to maintain strong passenger demand as travellers grow increasingly cautious about the wider economic and geopolitical impact of the conflict involving Iran.

Europe’s largest airline by passenger numbers reported a 40% increase in annual profit on Monday but warned that fare growth is expected to weaken in the coming months because of softer consumer confidence.

Chief executive Michael O’Leary said the airline is introducing additional price discounting to encourage bookings during the peak summer season.

“There is a little bit of customer nervousness out there,” O’Leary told analysts during a conference call. “We’re having to do a little bit of price discounting to keep the volumes going.”

Ryanair Expects Lower Average Fares

The airline forecast a mid-single-digit percentage decline in average fares during the April-to-June quarter compared with the same period last year.

For the July-to-September peak summer period, Ryanair expects fares to remain broadly flat.

However, O’Leary described the outlook as conservative and suggested demand could rebound strongly once geopolitical tensions ease.

He added that the airline anticipates a “reasonable surge” in bookings if the conflict comes to an end.

Fuel Supply Concerns Ease Across Europe

Ryanair also said fears of jet fuel shortages disrupting European flights this summer have largely disappeared.

According to O’Leary, refiners have secured alternative crude supplies and increased production, reducing the likelihood of widespread operational disruptions.

“The risk of a jet fuel shortage forcing cancellation of flights in Europe this summer has dropped to almost zero,” he said.

Even so, Ryanair acknowledged that a prolonged conflict could still affect profitability through weaker consumer demand and elevated fuel costs.

Airline Protected By Fuel Hedging Strategy

The airline has hedged 80% of its jet fuel requirements through to the end of March next year at approximately $67 per barrel.

That figure remains well below current market prices, helping shield the company from some of the recent volatility in energy markets.

Nevertheless, Ryanair warned that passenger costs could still rise by a mid-single-digit percentage if fuel prices remain elevated.

Profit Beats Expectations

Ryanair reported a full-year post-tax profit of €2.26 billion, slightly ahead of analyst forecasts of €2.2 billion.

The results excluded an €85 million provision linked to a fine issued by the Italian competition authority, which the airline says it expects to overturn on appeal.

Shares initially fell by around 3% after the results were released but later recovered, climbing 5.5% following more optimistic comments during the analyst call.

O’Leary Contract Extension Near Completion

Ryanair also confirmed it is close to finalising negotiations on extending Michael O’Leary’s contract until 2032.

The proposed extension reportedly includes a new 10 million share-option agreement tied to performance targets.

A previous share option scheme could reportedly earn O’Leary as much as €100 million.

When asked whether the extension would be his final contract with the airline, the 65-year-old chief executive declined to answer directly.