With summer just around the corner, air fares are rising following the recent oil price surge sparked by the war in the Middle East. Willie Walsh, the Irishman who heads the International Air Transport Association, told a press conference this week that carriers were already passing on extra fuel costs by boosting ticket prices.
Walsh calculates that jet fuel prices have jumped around 50 per cent since the US and Israel struck Iran four weeks ago. It hit $197 (€171) a barrel last week and traded at around $185 within the past few days. Around 40 per cent of the world’s supply passes through the Straits of Hormuz, which the conflict has largely closed off.
Fuel accounts for more than a quarter of the average airline’s costs, according to Walsh, whose organisation represents 85 per cent of the world’s air travel industry. With profits at around 4 per cent, many have little choice but to hike fares. “It’s happening already,” he observed.
Cathay Pacific, one of Asia’s biggest carriers, added 34 per cent to fuel surcharges – an extra levy on ticket prices – on Thursday, its second increase in as many weeks. China’s Spring Airlines signalled that it too was considering extra surcharges.
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Irish and European travellers have so far been spared the worst. Walsh noted that airlines in this part of the world hedge their fuel. In other words, they buy in advance at pre-agreed prices, limiting the impact of day-to-day market volatility. That insulates passengers here from the surge in oil prices, for now at any rate.
In better news for Irish air travellers in particular, Gerald Khoo, an aviation analyst with investment bank Panmure Liberum, this week ranked Ryanair and Aer Lingus’s owner International Airlines Group (IAG) as the European airlines whose hedging policies best equip them to ride out the crisis.
But they may not be 100 per cent immune either. Eddie Wilson, chief executive of Ryanair DAC, the Irish airline giant’s biggest subsidiary, explained that the group has hedged 80 per cent of its fuel for this year, but it would still have to pay for the remaining 20 per cent, which might have an impact as the year moves on.
Markets believe the crisis will ultimately pass, according to Walsh, who pointed out that longer-term pricing shows jet fuel easing back again. “The good news is that people believe it’s a short-term issue,” he said.
Michael O’Leary, Ryanair Holdings chief executive, told the Financial Times earlier this week that prices for next year were $75 to $80 a-barrel. He said the group would hold off on hedging for 2027 for a few months, in the hope that it slips below $70.
Passenger cap
Airlines are grappling with the latest crisis to hit their industry as another chapter in a local one played out this week in Leinster House, where politicians clashed with air travel industry figures over the 32 million-a-year limit that planners placed on passenger numbers at Dublin Airport in 2007.
Over the past three years, the so-called passenger cap has sparked litigation, heated debate and most lately, threats of international retaliation.
Among other things, it emerged that the cap is not a cap at all. Or at least, according to Declan Fitzpatrick, chief executive of the Irish Aviation Authority (IAA), no-one ever intended to halt the airport’s growth at 32 million passengers a year.
Instead, Fingal County Council calculated in 2006 that numbers would reach 40 million in the 2030s, which the local authority believed would require a third terminal on the airport’s western side. Its local area plan envisaged two terminals, as Dublin now has, capable of handling 30 million passengers between them, with a third taking numbers to 40 million and beyond.
When An Bord Pleanála gave permission to build Terminal 2 at Dublin Airport in 2007, it added two million as a contingency, so as not to stymie growth should the third facility not materialise on time, Fitzpatrick noted. “The 32 million cap is not a cap on the whole airport, rather on terminal one and terminal two,” he told the Joint Oireachtas Committee on Transport this week. It was simply meant to ensure the airport’s balanced development, he added.
As technology has made airlines and airports better at processing passengers, planners and the industry recognise that Dublin, which handled 36.4 million travellers last year, does not now need a third terminal. But the troublesome planning condition based on this notion remains.
Air travel industry figures warn that it leaves the Republic, home to some of Europe’s most frequent fliers, facing consequences ranging from higher air fares to the loss of jobs and a fracture in its economic relationship with the US.
The most viable solution left is the Government’s proposed Dublin Airport (Passenger Capacity) Bill 2026, giving Minister for Transport Darragh O’Brien the power to revoke or amend the cap, if the Oireachtas passes the legislation.
On the second of two days of transport committee hearings, a precursor to a full Oireachtas debate on the law, Aer Lingus chief executive Lynne Embleton stressed that politicians should enact the Bill before a critical court of justice EU ruling due in coming months.
That could force the IAA to take the cap into account when it decides in October on the conditions for allocating take-off and landing slots for summer 2027 to airlines at Dublin. If the authority must do this, Fitzpatrick confirmed that existing airlines would lose slots at the airport, while it would bar the launch of new routes and eliminate flexibility to deal with spikes in demand at peak travel times.
The net effect would be a 12 per cent reduction in traffic, from 36.4 million last year to 32 million. According to Embleton, Aer Lingus calculates that the loss of one million passengers at Dublin will cost the Republic €1.4 billion, 37,000 jobs and the exchequer €320 million. “That would have a catastrophic impact on connectivity, on the airport, and on the wider Irish economy,” she told TDs and senators.
Politicians are already sailing close to the wind, according to Walsh. Airlines plan ahead, so if the law is not passed well before October, they will assume that the cap remains in place and move aircraft and crews to competing airports in Britain and Europe, from where they will be unlikely to return. He argues that early September is the latest date by which the Oireachtas should pass the law.
Lawsuit
The reason none of this has happened by now is that the High Court halted implementation of the cap pending the outcome of a lawsuit taken by Aer Lingus, Ryanair and industry body Airlines for America (A4A). Before this, the IAA did take it into account when allocating slots for October 2024 to March 2025, air travel’s winter season.
During that period, Nick Cole, deputy chief executive of DAA, the State company responsible for the airport, says air fares to Europe rose 13 per cent while airlines cut flights, reducing the available seats by 3 per cent. Once the High Court stalled its implementation by ordering the IAA not to take the cap into account, fares stopped rising and flights increased.
A4A has complained to the US department of transportation, saying that the cap breaches the EU-US Open Skies treaty, which allows each jurisdiction’s airlines access to the other’s airspace and airports. Chris Sununu, its chief executive, told the committee that a failure to axe the cap could result in the loss of Irish flights to the US.
“There’s a very strong possibility that you will lose flights to New York, that you will lose flights to the US, absolutely,” he said. Sununu, a former governor of New Hampshire, says that the White House is watching the issue closely. He cautions that it is not always possible to predict how the administration will act once it decides to do so.
This will bring the opportunities opened to the Republic by new aircraft that cut the cost of transatlantic flights to a “screeching halt”, Sununu said. Unless it is lifted, he cautioned that it threatened to damage the economic relationship between the two countries, while stressing that he believed that no-one on either side wanted that.
Green Party leader Roderic O’Gorman accused A4A of presenting opinion as legal fact, and using veiled threats of retaliation from the Trump administration to pressure Irish law makers into enacting the legislation quickly.
However, Sununu noted that Open Skies allows airlines unfettered access up to airports’ physical capacity, which bars constraints such as the passenger cap. “This is a clear violation, you cannot artificially limit access,” he said.
Fianna Fáil’s Cathal Crowe also called on A4A to withdraw its statement that the cap was a treaty violation. He argued that the agreement was “country to country” not “airport to airport”. US carriers unable to fly to Dublin could go to Shannon, Co Clare, which has ample spare capacity, he said.
Crowe, whose constituency is Clare, frequently presses the mid-western airport’s case. He believes that regulation should direct more flights and airlines, European and transatlantic, to the regions.
Ryanair’s Eddie Wilson countered that airlines unable to fly to Dublin would be more likely to choose airports in Britain or Europe. “No-one does more for regional airports than Ryanair,” he added, noting that it has a significant presence in Cork and Shannon, and also serves Ireland West Knock Airport.
Sununu argued that Britain, where airports are once again in expansion mode, would be the big winner should Irish politicians fail to axe the cap quickly. “They love this,” he said, predicting “the Brits” would write the Republic “a big thank you letter” should it maintain the passenger limit.
Aer Lingus says it first raised concerns about the cap with DAA in 2012. Ryanair and the US carriers flagged it before the Covid pandemic hit in early 2020. The State-owned airports operator asked Fingal County Council, its local planning authority, for permission to increase the limit to 40 million in an application seeking the go-ahead to expand its existing facilities filed in December 2023.
Airlines say this was too late. DAA did approach Fingal and An Bord Pleanála about the issue in 2018, but planners rebuffed it, Vincent Harrison, its chief commercial and development officer, maintains.
At the time, the company was seeking permission for its north runway while the Government was establishing the Airport Noise Competent Authority, an independent directorate “within” Fingal County Council, a process that Harrison noted took several years.
“Fingal and An Bord Pleanála told us that they could not accommodate the two applications at the same time,” he told the committee.
The council has yet to decide on the 2023 planning application, leaving O’Brien’s proposed Bill as the only means of lifting the cap, something the Coalition pledged to do when it took office at the start of last year. Wilson noted several times on Wednesday that the Government has had 16 months to make good on this. “They should just get it done,” he declared.
