The hidden fear hanging over tourism in 2027

Summary

European travellers could face a new wave of air fare increases in 2027, as high fuel costs, the gradual erosion of airlines’ protection against energy-price swings and pressure on available capacity create a particularly challenging environment for the industry.

A warning from Ryanair chief executive Michael O’Leary that fares in the European market could rise by as much as 20% next summer has brought the cost of air travel back into focus, at a time when travel demand remains high but geopolitical uncertainty and the energy crisis continue to influence business decisions.

O’Leary attributed his fare outlook to a combination of high fuel costs and a possible reduction in available capacity.

The prospect is particularly significant for Greece, given tourism’s heavy reliance on air links and the country’s distance from key visitor markets.

According to the latest data from the Hellenic Statistical Authority (ELSTAT), passenger air transport prices in Greece were already up 22% year on year in September 2026, highlighting the scale of increases even before airlines face the additional pressures they may encounter in 2027.

What is changing now

The crucial issue of fuel hedging

Through fuel hedging — protection against fluctuations in fuel prices — airlines use financial contracts to limit their exposure to future price rises. This gives them greater predictability over their costs, without eliminating the risk altogether.

Ryanair is a case in point. O’Leary said the company had hedged 80% of its fuel needs through March 2027, at a reference price of about $67 a barrel.

But the picture changes sharply for the following financial year, which starts in April 2027. Ryanair has secured cover for just 15% of its needs, at a reference price of about $85 a barrel.

This means that 85% of its needs for the next financial year are not covered by these contracts, leaving the company more exposed to prevailing market prices.

According to O’Leary, the problem is not confined to Ryanair, as other European airlines also have limited cover for 2027. If fuel prices remain high, companies will have to either absorb more of the cost, squeezing their profitability, or adjust fares.

Data from the International Air Transport Association (IATA, the global trade association for airlines) also highlight the scale of the problem: airlines worldwide had hedged about one-third of their expected fuel consumption for 2026. In Europe, the level of cover before the energy crisis was close to 70%.

József Váradi, chief executive of Wizz Air, also underlined the importance of hedging contracts for next year, speaking at Routes World 2026 in Frankfurt. He said the company had secured cover for 50% of its fuel needs for summer 2027, at about $900 a metric tonne.

Capacity cuts

Beyond fuel, the supply of airline seats also plays a major role in determining fares.

Aegean is taking a more cautious approach to planning for 2027. As the company’s chairman, Eftichios Vassilakis, noted during the latest conference call with analysts, based on current conditions the airline does not expect to increase capacity, measured in available seat kilometres (ASKs), in 2027. It has not ruled out reducing frequencies on some domestic and international routes.

Similarly, Ireland’s Ryanair cut its passenger traffic target from 216 million to 214 million for the financial year ending in March 2027, according to an announcement in September.

Other European airlines face similar pressures. easyJet has announced further cuts of 600,000 to 700,000 seats from its winter 2026–27 schedule, in addition to about 700,000 seats already removed.

A study by Oxera for ACI Europe, the association of European airports, also highlights the importance of available capacity and competition in determining fares. Its findings were published on 22 October.

The analysis, which drew on more than 62,000 observations across nearly 6,000 European routes, found that an airline’s withdrawal from a route is associated with fares that are 9.7% higher, while the entry of a new competitor is associated with fares that are 6.7% lower.

What ticket prices show

According to global data from OAG, the lowest available air fares recorded at departure were up 12.3% in September 2026 compared with the same month in 2025. The average price was $448, against $399 a year earlier.

These figures are based on the lowest available fares at the time of departure and do not reflect the average actual expenditure of all passengers.

There have also been notable fluctuations in the European market. According to Eurostat, Greece recorded the largest annual increase in passenger air transport prices among EU member states in August 2026, at 16.3%.

Ireland followed at 14.4%, while prices across the EU fell by 0.4% year on year.

Forecasts for 2027

Despite warnings of sharp price increases, forecasts from international organisations do not point to a single scenario.

The joint report by the Global Business Travel Association (GBTA) and ALTOUR, titled “2027 Global Business Travel Forecast”, projects that the average price of business air travel worldwide will rise by 4.7% in 2026 to $756. A further increase of 1.5% is forecast for 2027, pointing to a slowdown in the pace of price rises, but not a return to previous levels.

The energy crisis and airlines’ resilience in 2027

Pressure from the cost of aviation fuel is not necessarily expected to ease in 2026, with the International Air Transport Association (IATA) warning that prices could remain high throughout 2027.

According to its analysis, “Quarterly Air Transport Chartbook - Q2 2026”, disruptions to energy supply, limited stock availability and pressure on refining operations are creating conditions that are unlikely to ease quickly.

The average price of aviation fuel stood at $158 a barrel in the second quarter of 2026, up from $124.7 in the first quarter, a 27% increase. In April, it had reached as much as $188.4 a barrel, as disruptions to fuel exports from the Persian Gulf region curtailed available supply.

IATA estimates that pressure on aviation fuel supply and low inventories could persist into 2027, adding to airlines’ operating costs.

Beyond high costs, the adequacy of aviation fuel supplies is another source of concern for 2027. According to a study by Tourism Economics, a company within the Oxford Economics group, the European market remains vulnerable in terms of supply, despite efforts to replenish volumes affected by disruptions in the Middle East.

The study, titled “The Renewed Risk of a Jet Fuel Shortage” and published in August, examines two hypothetical scenarios for 2027. In the event of a prolonged fuel shortage, European air passenger demand could be 8.8% below the baseline forecast, equivalent to 107 million passengers. If the shortage worsened, the shortfall could reach 27.8%, equivalent to 339 million passengers.

Pressure on consumers must also be factored into an already challenging environment. Inflation and households’ limited purchasing power add to uncertainty over the trajectory of travel demand in the coming months, as potential further increases in air fares could leave households with even less disposable income for holidays.

Comments from executives in the European aviation market have added to these concerns. Andrew Macmillan, head of strategy at Manchester Airports Group, noted that consumers still want to travel, but it remains uncertain how long that appetite will last under current economic conditions.

Peter Gerber, chief executive of Germany’s Condor, shares concerns about how much passengers can absorb. He said airlines were nearing the limits of the fare increases they could pass on to travellers. He also warned that if conditions do not improve, capacity restrictions could be introduced towards the end of winter 2026–27 as protection from hedging contracts gradually runs out.

Demand remains resilient, but uncertainty is growing

Despite higher costs, demand for air travel remains resilient. In its latest forecast, issued on 20 October, the European Organisation for the Safety of Air Navigation (EUROCONTROL) expects flights in the European area it monitors to rise by 1.7% in 2026, down from its previous forecast of 2.7%.

For 2027, it expects growth to accelerate to 3.2%, with the total number of flights reaching about 11.6 million.

The forecast is based, among other things, on the assumption that geopolitical tensions in the Middle East will begin to ease by the end of the first quarter of 2027. In the downside scenario, the crisis is expected to continue at least until early 2028.

For Greece, detailed Eurocontrol data forecast that IFR movements — instrument flight rules flights under air traffic control — including arrivals, departures and overflights of Greek airspace, will increase by 6.9% in 2027, against 5.8% in 2026, bringing the total close to 1.3 million.

The resilience of travel demand is also reflected in data from lastminute.com. According to its “Travel Horizons – September 2026” survey of 5,001 consumers across five major European markets, one in five said they were taking more holidays abroad.

The company’s data also show a 7.9% increase in bookings made more than six weeks before departure.

Concerns in Greece’s tourism market

Industry figures in Greece’s tourism market are also concerned about the outlook for air fares in 2027, given the country’s heavy reliance on air links and its distance from key visitor markets.

They note that this year’s season has been positive, with Greece showing considerable resilience in the face of geopolitical turmoil. At the same time, however, they are concerned about high prices and their impact on travel decisions, as well as the pressure that high energy costs are putting on tourism businesses’ profit margins.

Against this backdrop, Ryanair’s warnings of possible fare increases have added to concerns ahead of the next tourism season. Tourism market sources believe that uncertainty and the time remaining until summer 2027 could lead to a greater concentration of bookings close to the departure date, noting that 2026 was also marked by last-minute bookings.

Watch Now