Ryanair warns over fuel cost impact

Budget airline Ryanair highlighted the pressure of rising fuel costs on the industry today after posting flat profits for its spring quarter.

The carrier, which has a fleet of 272 planes, said its fuel bill rose by 49% or 140 million euros (£123 million) on a year ago to 427 million euros (£375.8 million ) in the period between April and the end of June, depressing growth in first quarter profits to 1% at 139.3 million euros (£122.6 million).

The costs offset a 29% rise in revenues to 1.15 billion euros (£1 billion), which reflected an 11% rise in average fares and an 18% jump in passenger numbers to 21.3 million. Comparisons with last year were aided by the disruption to services caused by the Icelandic ash cloud in 2010.

Ryanair said fuel prices remained "stubbornly high" with spot prices currently at 118 US dollars (£72.30) a barrel. However, it has bought 90% of its requirements for the current financial year to next March at around 86 US dollars a barrel, an 18% increase on last year.

Chief executive Michael O'Leary added: "High oil prices are forcing competitors to further increase their fuel surcharges and fares which make Ryanair's low fares even more attractive.

"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."

Ryanair reiterated that it expects traffic to fall by 4% in the second half of this financial year as a result of cuts in winter capacity.

The reductions, coupled with changes in its mix of routes and bases and the upward pressure on prices in the industry, will lead to a 12% rise in average fares during the current financial year, as previously announced.

Ryanair added that ancillary sales grew 22% to 248 million euros (£218.3 million) in the quarter and now amounted to 21% of total revenues.

The company has recently started trials of "reserved seating" for 21 extra legroom seats on selected routes for a fee of 10 euros (£8.80) per seat.