Ryanair increases profit forecast - but says sliding oil prices mean more competition from rival carriers

The company now expects an annual profit of €840m to €850m

Michael O'Leary, chief executive of Ryanair (Getty)

Ryanair has increased its profit forecast for the third time in four months - but the budget carrier cautioned on the coming year's growth because it has already bought most of its fuel nearly double the price of current levels.

The low-cost airline, which owns 29.8 per cent of British Airways bid target Aer Lingus, said it had hedged 90 per cent of 2015-16 fuel requirements at the equivalent of $92 a barrel against today’s spot price of $51.

Chief executive Michael O'Leary said: "We would counsel shareholders and analysts to temper expectations for the 2016 financial year.

"While we are still finalising our budget, we believe that any growth in profits will be modest as our fuel is hedged at $92 whereas some competitors (whose weak balance sheets rendered them unable to hedge forward) will be significant beneficiaries of lower oil prices and this may lead to downward pressure on air fares in 2015/16."

He added: "We have noticed a softening in prices for forward bookings during the first weeks of January."

Ryanair shares, which have risen from €7 in October following profit upgrades in November and December, fell 50 cents to €9.90.

O'Leary’s shift of policy to make Ryanair more customer friendly and to try to attract more business passengers is clearly paying off.

Third-quarter revenues rose by 17 per cent to €1.13 billion (£750 million) with passenger numbers up 14 per cent to 20.8 million. At the same time the load factor, or measure of how full planes are, rose by 6 per cent to 88 per cent, making each flight more profitable.

That enabled it to raise its after-tax profit forecast range from €810 million- €830 million to €840 million- €850 million for the year to end-March.

O’Leary played a straight bat over the €1.3 billion bid for Aer Lingus, where Ryanair’s near-30 per cent stake will be crucial.

He said: "Since Ryanair has received no formal approach, or offer for our shares in Aer Lingus, we will not engage in any speculation about this proposal, other than to restate our position which is that the board of Ryanair will carefully consider any such offer."

But elsewhere there is plenty of speculation that BA owner IAG's latest proposed bid of €2.50 per share is enough to keep O'Leary happy while the real fight for control is around the Irish government’s 25 per cent stake.