Ryanair profits under pressure

Low cost airline Ryanair profits are under pressure due to fare cuts

Low cost airline Ryanair said full year profits would be impacted by aggressive action to slash fares to attract cash-strapped fliers.

The group - headed by flamboyant boss Michael O'Leary - said annual net profits were now expected at the lower end of market forecasts for between 200 million euros (£172.8 million) and 300 million euros (£259.2 million).

Ryanair reduced fares by 13% on average over the three months to June 30, which saw revenues come under pressure, although significantly lower fuel costs helped profits climb almost seven-fold.

Ryanair, which last week announced it was cutting its winter services out of Stansted by 40%, reported first quarter net profits of 136.5 million euros (£118 million) up 550% thanks to plunging fuel costs.

Its revenues fell slightly, down 0.3% to 774.7 million euros (£669 million).

But passenger numbers rose 11% and Ryanair also grew "ancillary" revenues - such as extra fees for checked-in baggage and credit cards - 13% to 165.3 million euros (£142.9 million).

Mr O'Leary said: "Thanks to a 13% reduction in average fares we grew traffic by 11%, which was a robust performance in a deep recession, when many of our competitors were cutting flights, losing traffic and reporting increased losses."

Its fuel costs were 42% lower than last year, when the oil price bubble hit airlines hard.

Ryanair has now taken out hedging - effectively insurance - to fix fuel prices for the year ahead, with aims to see annual savings of 460 million euros (£397.3 million).

The Dublin-based airline, which launched in 1985 with a single 15-seater aircraft, is hoping its "no frills" model will help it take advantage of the consumer drive for lower prices.