Ryanair is set to use AI to improve productivity and freeze the pay of some of its staff in a bid to cut costs ahead of rising energy costs. 

Michael O’Leary, chief executive of the budget airline, said the energy costs facing European airlines will be “significantly higher next year,” because many of their fixed-price contracts for jet fuel will run out. 

Carriers have been grappling with higher jet fuel prices since the beginning of the Iran war in February, and the airline boss said he expects costs to “remain elevated well into” next year.

O’Leary had already warned of significantly higher air fares next year, but O’Leary cautioned that Ryanair will need to reduce spend to offset €2bn in higher costs.

He said: “To help address this, we’re reviewing all costs across group airlines with a particular focus on airport churn negotiations […] maturing labour agreements (which may require temporary pay freezes), lower crewing ratios and increased use of AI to drive further operational and back-office/support functions productivity.”

Ryanair posted a 16 per cent dip in pre-tax profit to €2.4bn in the six months to the end of September. Jet fuel prices doubled in the period, as revenue lifted four per cent to €5.5bn.

Over the period, the no-frills airline saw passenger numbers rise six per cent to 125.8m, and fares fell by four per cent. 

Ryanair witholds guidance

In the current financial year, Ryanair has hedged 80 per cent of its jet fuel requirements on a fixed price of €67 per barrel. This has “widened our cost advantage over other EU competitors and helped insulate current year earnings,” the firm said.

Ryanair added that its €2.6bn gross cash and €700m of unused credit facility put it in a better position than its European rivals. Earlier this year, O’Leary warned that many of the airline’s competitors in the continent could collapse due to higher costs.

“This financial strength widens the cost gap between Ryanair and our competitors, many of whom are heavily exposed to expensive (long-term) finance and aircraft lease costs,” the Dublin-listed firm said on Monday.

But the group’s protection from higher fuel costs is much lower for next year, with only 25 per cent of its energy needs hedged at about €95 per barrel. 

O’Leary refused to offer investors any profit targets for the full year, saying that volatile oil prices and last-minute booking behaviours make it “too early to provide meaningful […] guidance”.

Ryanair operates 620 aircraft at more than 200 airports. The group introduced 126 new routes in the past six months and set up a new base at Rimini in Italy. 

In September, O’Leary threatened to cut its flight capacity on the UK if the government does not abolish taxes on air passengers, claiming that the new overnight visitor levy will result in a “double tax” on tourists.