Ryanair cuts quarterly losses and ups annual profit forecast

Ryanair is boosting its full-year profit guidance to €275m (£240m) as third-quarter losses of €11m show a significant improvement on the €102m black hole in the same period last year.

The budget airline flew 16 million passengers in the three months to December, a year-on-year rise of 14 per cent. The average fare paid was 12 per cent lower, thanks to the series of price cuts to lure recession-hit customers away from non-budget rivals. But a 37 per cent drop in fuel costs helped offset the reductions and boost the annual profit forecasts from earlier estimates of "the lower end" of the €220m to €300m range.

Ryanair's third-quarter yields – the average price paid to fly one mile – also held up better than expected, falling by just 12 per cent, thanks to an improved mix of new routes and bases, and sharp cuts in capacity at high-cost airports such as Dublin and Stansted, the company said.

Ryanair has done well out of the recession, and expects to continue to do so, according to the carrier's chief executive, Michael O'Leary. "Market conditions remain difficult, although the increasing pace of consolidation and closures among our competitors, allied to Ryanair's continuing fleet expansion, will lead to further market share gains this year," he said.

The group's target is to grow by approximately 10 per cent to carry 73 million people over the next financial year. It has already benefited from the collapse of Blue Wings in Germany, Flyglobespan in the UK and MyAir in Italy, and expects further casualties this winter. "Despite the depth of the current recession, Ryanair will continue to grow traffic and profits (while most other airlines lose money) for the benefit of our passengers, our people, and our shareholders," Mr O'Leary said.

But some commentators are predicting that Ryanair will be forced to raise its prices, because ancillary revenues – income from extras such as baggage check-in and in-flight drinks – dropped to an average of £30.36 per person, from £32.43 last year. Bob Atkinson, at travelsupermarket.com, said: "Despite an increase in passenger numbers, it is inevitable Ryanair's fares will increase if it wants to hit its own tough financial targets. We can also expect to see the airline continue to look for ways to get more out of customers through extras."