Ryanair plans for ‘Armageddon situation’ on fuel shortage fears

Ryanair is preparing for an “Armageddon situation” over fears that the Iran war could trigger a global shortage of jet fuel.Neil Sorahan, the airline’s chief financial officer, said Ryanair had prepared for a worst-case scenario as fuel was expected to become more scarce in Europe.The airline has suspended financial guidance for the year because of uncertainty surrounding the Middle East conflict and ongoing closure of the Strait of Hormuz, a crucial trade artery. Before the war, Gulf refineries supplied up to 65pc of UK jet fuel, which travelled through the strait.Mr Sorahan told CNBC: “Do we have plans for some kind of Armageddon situation? Of course we do but I don’t see that coming to pass. As things stand, we’re operating a full schedule this summer and plan to operate a full schedule into the winter period.“I think we will see some of the weaker carriers who were already struggling before the war possibly go to the wall in the winter.”In an update to investors on Monday, Ryanair said Europe had relatively stable supplies of jet fuel after switching to sourcing from West Africa, the Americas and Norway but it warned prices were expected to remain high for some months.Since the onset of the Iran war, jet fuel prices have increased by 103pc to around $150 per barrel.Around 80pc of Ryanair’s jet fuel costs are covered by hedging – which enables airlines to buy fuel in advance at pre-agreed prices – but the remainder has been affected by the war.Mr Sorahan added: “We’re in obviously very volatile oil markets at the moment. If we go back a couple of months ago, we probably had some concern around oil supply but we’re increasingly confident that there won’t be issues in relation to oil into this summer.”Ryanair said passengers were increasingly booking flights at the last minute but it added that demand remained robust and it expected to fly 216 million passengers over the coming year, an annual rise of 4pc.Shares in the airline fell by around 2pc following the announcement.Willie Walsh, the head of the International Air Transport Association, which represents airlines, warned last week that higher ticket prices for air travel in Europe were “inevitable”.Some airlines have cut their European fares recently because of a lack of demand but Mr Walsh said that carriers would not be able to absorb the extra costs over time.Even if the Strait of Hormuz was to reopen, the damage to refining facilities in the Gulf and the disruption to crude oil supplies would mean that fuel prices would likely still stay elevated, Mr Walsh said.“Whichever way you look at it, I think this issue will continue for a number of months to come and may indeed continue into next year,” he told the BBC.Ryanair said on Monday that air fares had weakened in recent weeks in response to the Middle East conflict. Separately, it said pre-tax profits jumped 36pc to €2.4bn (£2.1bn) during the year to April, compared with a year earlier.