Surging fuel costs are eating into Ryanair's profits, which it has warned could lead to more expensive tickets and frozen pay for staff.

Ryanair reported on Monday that its post-tax profits were down 15% to 2.15 billion euros, or about $2.4 billion, for the six months preceding September 30.

As the world's largest budget airline, Ryanair is known for its cheap fares, bolstered by a strong fuel-hedging strategy that uses financial derivatives to lock in future prices. However, the Iran War has kept fuel prices high.

While Ryanair has hedged more than 80% of its fuel costs at around $67 per barrel until next March, the remaining fifth has doubled in price to roughly $130 per barrel, the airline said in its earnings report.

It added that it expects its fuel bill to increase by 2 billion euros ($2.2 billion) for the next financial year.

The airline said it believes airfares will rise due to higher jet fuel prices, but that won't be enough to offset all its additional costs.

"We need about a 20% increase in airfares, or about 10 euros per passenger, to fund all of that," CEO Michael O'Leary said on the earnings call. "While I do think there will be a significant boost in airfares next year, I am not sure we will see 20%. Therefore, we do need to close that gap."

The airline said it is therefore "reviewing all costs," which may include temporary pay freezes for staff.

Ryanair also suggested lowering the crew-to-passenger ratio on its flights, and increasing its use of AI to boost productivity in operations and support functions.

To reduce the impact of unhedged fuel costs, Ryanair has also cut its traffic target from 216 million passengers to 214 million, which would result in no year-over-year growth for the coming winter season.

Next year, it hopes to boost growth by 3% by expanding its fleet with 16 new Boeing 737 Max 10 aircraft. The Max 10 has room for an extra 20 passengers than the Max 8. The Max 10 was certified by the Federal Aviation Administration last month after years of delays, with European regulators likely to grant certification soon.

As of 7 a.m. ET, Ryanair shares were up about 2% in Europe, and 2.75% in pre-market trading on the Nasdaq, as it also announced a share buyback of 800 million euros ($896 million).