O’Leary’s warning against airlines being largely unhedged against higher jet fuel costs also coincided with developments unfolding on the western side of the Atlantic.
United Airlines forecast a fourth-quarter profit well below Wall Street estimates despite expectations for record revenue, as soaring fuel costs successfully ate into gains from strong travel demand and higher ticket prices.
As per O’Leary’s forecast, there would be fewer seats available next year as a result of bankruptcies and takeovers among airlines, which together with the unhedged positions would result in fares increasing by as much as 20%.
“You’re going to see airfares rise next year in Europe, I think by 10, 15, maybe 20%. You’re going to see the biggest increase in airfares, I would say, in history in Europe for the next 12 months,” O’Leary told a news conference in Brussels on Tuesday.
The Iran war has driven jet fuel prices sharply higher, squeezing margins for unhedged airlines. Factors like strong travel demand and higher ticket prices are not adequate anymore to get protection from the phenomenon.
O’Leary said that Ryanair and other European airlines had strong hedge positions on jet fuel for 2026, adding that Europe’s largest airline was 80% hedged at USD 67 per barrel until March 2027, when the conflict began at the end of February.
“From April 2027, most European airlines had very little hedging in place. Ryanair has just 15% of its fuel costs for next year at USD 85 a barrel, compared with spot rates around double that level,” he remarked.
In the United States, both airline fares and fuel costs are in competition for who can climb faster, squeezing profits industry-wide.
With the Iran war threatening to keep fuel prices elevated into 2027, analysts, agreeing with O’Leary, said carriers have two options: either raise fares further and risk losing customers or limit flight growth to support ticket prices and protect profits.
United’s rival Delta Air Lines has already cut its annual earnings forecast by nearly a quarter after projecting a USD 6 billion increase in its fuel bill from 2025.
Delta CEO Ed Bastian issued a similar warning to O’Leary, stating that the industry may need to further restrain flight growth to sustain higher fares and protect profitability.
United expects to pay USD 4.80 a gallon for jet fuel in the fourth quarter, about 45 cents more than the market consensus assumption.
“The difference translates into roughly USD 1 per share in earnings,” the company said.
The Chicago-based carrier expects adjusted earnings of 50 cents to USD 1.50 per share for the December quarter.
Alaska Air Group, another American major, added to the industry’s warnings on Tuesday, forecasting a fourth-quarter adjusted loss of USD 2 to USD 2.50 per share, compared with analyst expectations for a USD 1.04 loss.
The carrier expects its fuel bill for the year to run USD 1.8 billion above its original plan.
Alaska’s third-quarter revenue rose 14%, yet its adjusted pretax margin narrowed to 1.1% from 4.6% a year earlier.
It expects revenue per unit of capacity to grow by a low-double-digit percentage in the fourth quarter, despite bracing for a substantial loss.
In Q3, United’s additional fuel spending was equivalent to nearly 70% of the increase in the carrier’s quarterly revenue. Despite record sales, adjusted pretax profit fell, and its margin narrowed to 6.2% from 8% a year earlier.
Demand, however, remains strong.
The venture carried a record number of passengers, with revenue from business travelers, premium cabins, and basic economy all growing at double-digit rates.
United generated significantly more revenue without substantially increasing flying capacity.
However, rising airfares are hurting both passengers and airlines in the United States, despite the persistent strong travel demand.
According to Labour Department data, US airfares rose an average of nearly 23% year-on-year in the seven months through September.
On the fuel bill front, American carriers spent USD 42.9 billion in the first eight months of 2026, up USD 13.2 billion from a year earlier despite slightly lower consumption.