Soaring fuel costs eat into Ryanair's profits

Ryanair fell short of market expectations with its quarterly profits yesterday, as soaring fuel costs offset rising passengers numbers and revenues.

The Irish budget carrier said adjusted profits after tax were up by just 1 per cent at €139m (£123m) in the three months to the end of June, against expectations of a jump to more than €150m. The slim gains came despite an 18 per cent rise in passenger numbers to 21.3 million, and a near 30 per cent rise in revenues to €1.16bn, against €899m in the same period last year, when the airline industry was hit by the Icelandic ash cloud.

The culprit was the high price of jet fuel, with Ryanair, whose shares fell 2 per cent yesterday, saying that its costs were up by nearly 50 per cent to €427m. In contrast, easyJet sent its shares soaring 17 per cent last week after saying it expected annual pre-tax profits to land between £200m and £230m, against hopes of about £184m.

But Ryanair's chief executive Michael O'Leary said the carrier, which has hedged 90 per cent of its fuel requirements for the year at about $86 per barrel, well below market prices, would gain as rivals are forced to "further increase their fuel surcharges and fares". He said: "It will also drive further consolidation and more airlines will exit the industry. This will generate growth opportunities for Ryanair because we operate the most fuel-efficient aircraft and have the lowest operating costs."

Alongside its results, Ryanair said it would sue BAA for "overcharging airlines" at Stansted, accusing the airport operator, which was last week told by the Competition Commission to sell Stansted and one of its Scottish airports, of "generating excess monopoly profits".

"We intend shortly to launch legal proceedings against BAA Stansted, seeking a recovery of substantial overcharges which Ryanair believes it and other Stansted airlines have suffered at the BAA Stansted monopoly's hands in recent years," it said.

But BAA, which may seek a judicial review of the Commission's decision, said its costs and revenues were scrutinised by the Civil Aviation Authority, "which also sets the amount we can charge airlines". It added: "Ryanair has no case for legal action."

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