Ryanair (RYA) Q2 2027 earnings review
Ryanair passenger traffic grows, but rising fuel costs squeeze profit
Ryanair, Europe's largest budget airline, filled more seats this summer, but cheaper tickets and expensive fuel reduced its profit. Second-quarter revenue rose 4% as passenger numbers increased 5%, while profit after tax fell 6% because market prices for unhedged oil doubled. Chief executive Michael O’Leary trimmed the full-year traffic plan to save on winter fuel, so by our math passenger volumes will dip about 1% in the second half.
| Q2 revenue | €5.70B +4% from a year ago |
|---|---|
| Q2 profit after tax | €1.61B -6% from a year ago |
| Q2 average ticket price | €63.40 -2% from a year ago (-6% in Q1) |
| Full-year traffic outlook | Cut to 214M from 216M (+3% growth vs a year ago) |
⚖️ Verdict: 🔴 Bearish
The story got worse because the low-cost fuel shield protecting this year's earnings is fading for next year. O’Leary locked in a quarter of next year's fuel at $95 a barrel, well above this year's $67 rate, and warned that higher ticket prices are unlikely to cover an estimated €2 billion jump in next year's fuel bill. On the brighter side, ticket prices are rising again in the third quarter, US regulators approved the delayed Boeing MAX-10 jet, and the board announced a new €800 million share buyback.
The question now is whether constrained European flight capacity lets Ryanair raise ticket prices enough to protect its margins when cheap fuel contracts expire next spring. One view is that rival airline cutbacks will push fares up across Europe, while the other is that a €2 billion fuel bill increase and engine maintenance costs will squeeze profit even if fares rise. Third-quarter ticket prices and the next batch of fiscal 2028 fuel contracts in January will show which side is right.
🐂 Bull Case
Ticket Prices Stopped Falling Ahead of Winter
Ryanair, Europe's largest budget airline, had to cut ticket prices in the spring after conflict in the Middle East made travellers hesitant to book. That price pressure eased during the peak summer months, and chief executive Michael O’Leary said third-quarter demand is strong "with fares trending modestly ahead of the same quarter last year".
- Second-quarter average ticket price: €63.40, down 2.2% from a year ago
- First-quarter average ticket price: €48.00, down 5.9% from a year ago
- Extra passenger spending (such as reserved seats and priority boarding): €25 per person in the second quarter, bringing in €1.61 billion, up 6.2%
The summer fare drop was at the best end of the 2% to 5% decline O’Leary forecast three months ago. Still, one quarter of smaller price cuts does not end the concern, because customers are booking closer to their travel dates and the airline has no visibility into the fourth quarter.
What to watch: third-quarter average ticket prices in the January results. A positive number after Christmas and school holiday bookings would confirm that Ryanair can raise prices again.
US Regulators Approved the MAX-10 Aircraft
Ryanair relies on the Boeing MAX-10, a larger jet with 20% more seats that burns 20% less fuel, to reach 300 million passengers a year by 2034. Repeated delays in regulatory approval had threatened that schedule, while O’Leary argued that industry-wide aircraft shortages and rival airline bankruptcies would keep European flight capacity tight.
The US Federal Aviation Administration has now certified the MAX-10, and O’Leary expects European regulators to follow before the end of the calendar year. That clearance will "enable Ryanair to take delivery of our first 16 MAX-10s in Spring 2027, in time for S.27", one more plane than the 15 previously planned, lifting next year's traffic target above 220 million passengers.
What to watch: European Aviation Safety Agency certification before December 31, 2026. Final European sign-off would lock in the spring 2027 delivery schedule.
Surprise €800 Million Buyback Restarts Cash Returns
After paying off its final €1.2 billion bond in May, Ryanair owns all 620 of its Boeing 737 planes debt-free. Management had previously indicated that the €750 million share buyback completed in September would be the last for a year or two while the company saved cash for new aircraft.
Instead, the board declared a €0.273 per share interim dividend and a new €800 million buyback starting in February 2027. Gross cash fell from €3.58 billion in March to €2.59 billion in September, and the airline drew €400 million from its credit line, so it is leaning on spring ticket sales to fund the payouts.
What to watch: gross cash and credit line borrowings in the full-year results next May. Rising cash after the February buyback starts would show that pre-summer bookings can cover both aircraft deposits and shareholder payouts.
🐻 Bear Case
Next Year's Fuel Bill Could Jump €2 Billion
Ryanair locks in fuel prices ahead of time to keep its costs below rivals, and management says its 80% coverage at $67 a barrel is protecting earnings this year. For the year starting April 2027, O’Leary said "While oil prices remain volatile, the Group has extended FY28 hedge cover on recent price dips to 25% at c.$95bbl".
That $95 price is 12% above the $85 level on its first batch of contracts three months ago and 42% above this year's $67 rate. O’Leary warned that higher ticket prices across Europe are "unlikely to provide a full offset for an estimated c.€2bn increase (based on current forward prices) in our FY28 fuel bill".
A €2 billion fuel jump equals 93% of the €2.15 billion net profit Ryanair earned in the entire first half of this year. The low-cost fuel shield that sets the airline apart in fiscal 2027 will turn into a major cost drag next spring unless oil prices drop.
What to watch: the average contract price as fiscal 2028 fuel coverage rises above 50% next quarter. Locking in more fuel near $95 a barrel would bake the €2 billion cost jump into next year's margins.
Fuel Spike Prompts Winter Flight Cuts
Market prices for the 20% of Ryanair's fuel that is not locked in doubled to about $130 a barrel during the first half amid conflict in the Middle East. That pushed second-quarter operating margin down 3.6 percentage points from a year ago to 31.9%, as fuel and oil expenses rose 13.3% to €1.71 billion, or 30.1% of revenue versus 27.6% a year ago.
To limit how much expensive market-price fuel it burns, O’Leary "reduced the Group’s exposure to unhedged fuel by cutting our FY27 traffic target from 216m to 214m passengers". By our math, that 2 million passenger cut leaves second-half traffic at 88.2 million, down 1.3% from a year ago instead of the 2% growth previously planned.
What to watch: full-year unit cost per passenger, as fixed overhead is now spread across 2 million fewer flyers. A rise above the 5% first-half pace would show that cutting winter flights raised non-fuel costs per seat faster than it saved on fuel.
Engine Maintenance and Carbon Taxes Lift Non-Fuel Costs
Even before fuel, expenses are rising faster than passenger numbers because Boeing compensation for late plane deliveries ended in February and European carbon taxes are climbing by €300 million this year. In the second quarter, depreciation (the cost of wearing out aircraft and engines) jumped 16.2% to €400 million, adding 0.7 percentage points of revenue.
- Engine and fleet wear: depreciation rose on provisions for "mid-life “hospital visits” on B-8200 LEAP engines" and older 737 maintenance
- Air traffic control and route fees: up 9.4% in the second quarter to €403 million on higher European rates
- Italian antitrust fine: paid in September 2026, contributing to a €258 million cash outflow in other assets while under appeal
- Profit outlook: still no full-year net profit target because fourth-quarter visibility is zero
Setting aside money early for repairs on its newer Boeing 737-8200 engines shows that maintenance inflation is hitting the modern fleet, not just older planes.
What to watch: third-quarter depreciation and maintenance expenses in January. Another mid-teens percentage jump in depreciation would confirm that engine overhaul reserves are a lasting drag on profit.
👓 Other Themes
Cost Review Targets Pay Freezes and AI
To prepare for next year's fuel bill, O’Leary launched a review of all group costs. The airline is targeting airport fee negotiations as new jets arrive, "maturing labour agreements (which may require temporary pay freezes)", lower crew-to-aircraft ratios and artificial intelligence in back-office support. Management gave no euro savings target, and any labour pushback or productivity gains will only show up when union contracts expire.
💲 Other KPIs
Total revenue rose 4.0% from a year ago, accelerating from 1.1% growth in the first quarter. Growth diverged across Europe as the airline shifted planes toward countries cutting aviation taxes: UK sales rose 8.1% to €834 million and Italy grew 5.5% to €1.22 billion, while Spain fell 1.6% to €968 million.
Down 29.4% from €6.44 billion in March 2026. This balance-sheet line includes cash customers have paid in advance for flights not yet flown, so it naturally drops after peak summer travel and drains €1.90 billion of operating cash in the first half.
Down 2.1% from 1,068.6 million a year ago after the Irish carrier cancelled 9.5 million shares in the first half to finish its €750 million buyback. The lower share count softened the second-quarter net profit drop from 6.3% to 4.3% per share.
🔮 Guidance
Cut. Management trimmed the full-year plan by 2 million passengers to burn less unhedged winter fuel. By our math, that leaves second-half traffic at 88.2 million, down 1.3% from a year ago after 5.7% growth in the first half.
New. The plan calls for traffic to grow about 3% next year once the first 16 MAX-10 jets arrive before summer 2027. That keeps annual growth below the roughly 4.8% compound rate needed to reach 300 million flyers by 2034 until larger plane deliveries arrive later in the decade.
New. Ticket prices are tracking slightly above last year's €44 third-quarter average after falling 5.9% in the first quarter and 2.2% in the second. Because passengers are booking closer to departure, the final result depends on late Christmas and school holiday sales.
Unchanged in direction, though management again gave no number after unit costs rose 5% in the first half. Spreading fixed costs over 214 million passengers instead of 216 million adds pressure, while the final figure rests on winter market oil prices.
Unchanged. Management said it is still too early to give a full-year profit range because it has no visibility into fourth-quarter bookings and earnings remain sensitive to Middle East and Ukraine conflicts, unhedged oil prices and air traffic control strikes.
❓ Key Questions
What is the full-year unit cost growth target now?
Management guided to a mid-single-digit percentage rise at the start of the year and printed 5% in the first half, but cutting winter flights spreads fixed costs over 2 million fewer passengers.
How big are the LEAP engine overhaul provisions?
Depreciation jumped 19% in the first half partly to reserve for mid-life repairs on newer Boeing 737-8200 engines, and investors need to know whether this charge steps up again as the fleet ages.
How much did Ryanair pay for the Italian fine?
Cash flow footnotes show the airline paid the Italian antitrust fine in September while appealing it, after previously recording an €85 million expense against the €256 million penalty.
When do union contracts expire for proposed pay freezes?
Management raised the prospect of temporary pay freezes as multi-year labour deals mature to offset next year's €2 billion fuel jump, which risks pilot or cabin crew strikes.