By Padraic Halpin

DUBLIN, Nov 2 (Reuters) - Ryanair may need to freeze staff pay as part of wider cost cuts, with the budget airline saying on Monday that an expected sharp rise in airfares next year would likely not be enough to cover a soaring fuel bill.

A doubling in the price of unhedged jet fuel contributed to a 6% fall in net profit to €1.61 billion ($1.80 billion) for Ryanair's key July-to-September quarter, although this was in line with expectations.

While CEO Michael O'Leary said that higher fuel costs would certainly lead European airlines to increase fares by a double-digit percentage next year, he was not sure Ryanair would reach the 20% needed to fully offset an estimated €2 billion, or 33%, jump in its fuel bill for the financial year that ends in March 2028, based on current forward prices.

"Unless there is a swift resolution of the Middle East conflict, we expect jet fuel prices to remain elevated well into 2027," O'Leary said in a statement.

Ryanair shares opened 2% higher.

DEMAND STRONG, FARES MODESTLY HIGHER

The Irish airline, Europe's largest in terms of passenger numbers, said it was reviewing all its costs and would also look to make savings through negotiations with airports, lower crewing ratios and increased use of AI in back-office operations.

One of Europe's best-hedged airlines, Ryanair said its fuel needs through March 2027 remained 80% hedged at $67 a barrel, while it was able to nudge up its hedges for the following 12 months over the last two weeks to 25% at $95 a barrel compared with 15% at an average of $85 previously.

Ryanair said demand in its current third quarter is strong with fares trending modestly ahead of the same period a year ago, following a 2% year-on-year decline in the three months to end-September.

Cautious travellers continue to book close to departure dates, meaning fares for the rest of the quarter will heavily depend on the strength of late bookings up to Christmas, it said.

Chief Financial Officer Neil Sorahan told Reuters he expected demand to remain strong next year and that "an extra €5 or €10 (on a Ryanair airfare) won't necessarily dampen people's willingness to travel."

He added that this week's US midterm elections and peace talks aimed at ending the US-Israeli war on Iran might open up opportunities for more fuel hedging with oil prices nearing a one-week low.

($1 = 0.8948 euros)

(Reporting by Padraic Halpin; Editing by Thomas Derpinghaus, Kirsten Donovan)

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