Cheap flights in Europe face a fuel cost reckoning as Ryanair’s CEO says fares could rise up to 20% next year because of the Iran war

Americans planning next year’s summer Euro trip may want to start saving now as the Iran war pushes up fuel prices and the CEO of the world’s biggest budget airline warns that the continent’s notoriously cheap short-haul flights could soon become more expensive.

Ryanair CEO Michael O’Leary said on CNBC following the company’s earnings call Monday that he expects European airfares to rise by 10%, and maybe even 20% next year, potentially dealing another blow to Americans hoping to visit multiple European destinations without breaking the bank.

Americans made nearly 24 million trips to Europe in 2025, a 5% increase from the previous year. Summer is one of the busiest tourist seasons for the region, and this year the European aviation network handled an average of 35,959 flights per day between June and August, a 2.4% increase from last year, according to The European Organisation for the Safety of Air Navigation.

But the Iran war, now in its ninth month, has disrupted global supply chains, including by effectively closing the Strait of Hormuz, through which about 20% of the world’s oil passed before the war. That has driven up oil and jet fuel prices increasing the burden on airlines, for which fuel is the second-biggest expense behind labor.

Ryanair, Europe’s largest airline by passenger traffic, shows what could be in store for travelers next year.

Hedging (fuel) bets

Ryanair has been more insulated from rising fuel prices than many of its rivals because of fuel hedging, the practice of locking in prices ahead of time to protect against market volatility.

O’Leary said Ryanair has locked in a price of $67 per barrel for 80% of its fuel needs through March 2027, helping keep costs in check for now.

Beyond that, though, only 25% of its fuel needs for the following fiscal year are hedged at about $95 per barrel, leaving the remainder exposed to higher market prices. Brent crude stood around $110 per barrel Monday, up 70% from a year ago.

Ryanair said in its fiscal second quarter earnings Monday that its annual fuel bill will increase by about  2 billion euros next year (for the fiscal year ending March 2028). O’Leary said fares would need to rise 20%, or about 10 euros per passenger, to cover all of it, but even he said the increase in fares might not fully cover the additional expense. To close the gap, the company said it is reviewing costs, including temporary pay freezes for labor agreements that mature in April and lower crew ratios.

O’Leary’s comments highlight another potential expense for Americans already dealing with increasing inflation, especially in the travel sector.

U.S. airfares rose 22.4% in September compared with a year earlier, according to the Bureau of Labor Statistics, about six times the overall inflation rate. The average domestic airfare reached $445 in the second quarter, according to the Bureau of Transportation Statistics. Unlike Ryanair, major U.S. airlines abandoned fuel hedging years ago, leaving them more immediately exposed to surging fuel prices. 

Fewer flights

Pricier jet fuel could also mean fewer flights to choose from. Ryanair has already reduced its annual passenger target from 216 million to 214 million for the fiscal year ending in March, and said it expects winter traffic to stay flat as it limits exposure to more expensive fuel. O’Leary said competing European airlines are already cutting capacity, which could drive up prices as travelers compete for fewer seats.

Still, the higher prices could actually benefit Ryanair. O’Leary argued that competitors facing even greater financial pressure will have little choice but to raise fares, which means his airline can do the same while also maintaining its low-cost advantage.

“They are under much more pressure to get pricing up,” he said during the company’s earnings call. 

O’Leary also said Ryanair could maintain or even widen its margins as competitors increase their fares.

For travelers hoping to squeeze several European cities into one vacation, the consequences could add up. A 50 euro flight that rises 20% would cost 60 euros. While that might seem small on its own, multiple family members and destinations could add to the cost. 

For his part, O’Leary warned that travelers thinking about waiting for a bargain next summer should instead look at tickets now.

“I would encourage them all to book early, because the longer you wait, the higher fare you are going to pay,” he said. 

This story was originally featured on Fortune.com