Ryanair said on Monday that it expects flight prices this summer to be broadly flat on last summer, cutting its previous forecast of a modest increase in peak season fares. The company said fares had fallen in recent weeks due to uncertainty around conflict in the Middle East.

The airline expects prices to fall by a mid-single-digit percentage in the three months ended in June. Shares in Ryanair, which are listed in Dublin, dropped by about 4% in early trading on Monday morning, and the stock has lost more than a quarter of its value since the start of the year.

"Demand is still strong, but people are leaving it longer to book so we do not have the visibility that we normally have for July to September," chief financial officer Neil Sorahan said. He added that he was increasingly confident the airline would not face any supply shocks this summer.

"Closer-in bookings are strong but if people leave it late they could take on higher fares," he said. Holidaymakers are booking their summer trips later than in previous years and are showing increased interest in domestic trips.

Dan Coatsworth, head of markets at AJ Bell, said the carrier was constrained in how it could respond to cost pressures. "The market is too fragile to raise fares in response to rising costs, as higher inflation continued to squeeze consumer spending," he said. "Airlines and holiday companies are having to drop prices, or at best keep them level, just to keep demand ticking over. If cost pressures remain intense, they will have no choice but to put prices up. Fortunately, Ryanair has a strong enough balance sheet to weather any storms."

Ryanair, the biggest airline in Europe by passenger numbers, reported a record profit after tax of €2.26bn (£2bn) in its financial year ended in March. The company suspended guidance for its financial year ending in 2027, saying it was far too early to provide forecasts owing to potential increases in fuel, environmental taxes and wage bills.

The airline has hedged 80% of its jet fuel requirements to April 2027 at about $67 a barrel, though it said unit fuel costs could still rise if prices remained higher. It expects its environmental taxes in the EU to increase by €300m this year to about €1.4bn. Shipping through the Strait of Hormuz remains restricted, while Europe is well stocked with fuel thanks to shipments from West Africa, Norway, and the Americas.

The company is in negotiations with chief executive Michael O'Leary, who has held the role since 1994, about extending his contract beyond 2028 to 2032. Under the proposed new contract, O'Leary would be able to buy 10 million shares at the market price before the Iran war, contingent on achieving ambitious profit after tax or share price growth targets. Sorahan said details of the new contract would be confirmed over the next few weeks.