Competition heats up for UK's top low-cost airlines

Easyjet And Ryanair yesterday vied with one another for the title of Britain's most successful leading low-cost airline.

EasyJet led the way with an announcement that its August passenger count rose 17 per cent after the airline added routes across Europe through the takeover of Go, the low-cost airline which was formerly owned by British Airways. EasyJet's load factor - the number of passengers carried as a proportion of available seats - rose to 88.1 per cent from 87.2 per cent.

Ryanair said it carried 2.14 million passengers in August, 44 per cent more than a year ago. But because it had laid on more planes its load factor fell 5 per cent to 90 per cent.

In the group's annual report, the chief executive, Michael O'Leary, warned that he expected trading in the year to next March to be "more modest compared with the past two years of exceptional growth".

He added: "Given the extraordinary increase in new routes and capacity in recent months, we expect to deliver substantial traffic growth over the coming year.

"This rapid growth, combined with the recent weakness of sterling to the euro will cause yields to decline by between 10 per cent and 15 per cent, compared with our more normal prediction of 5 per cent. Costs are continuing to fall, due to the impact of the new 737-800 series aircraft and new lower-cost bases and destinations all over Europe. We believe that we will deliver a material increase in profits as we strive to deliver after-tax margins of just over 20 per cent-plus."

Ryanair has taken delivery of 150 new Boeing jets, which rapidly expands its network, in a bid to become Europe's biggest airline.

The Ryanair annual report also disclosed that Mr O'Leary's salary last year rose from €694,000 (£482,000) to €782,000. His performance-related bonus rose from €180,000 to €228,000, and his total accumulated accrued pension benefit rose from €57,100 to €70,400.

EasyJet flew 1.99 million people last month compared with 1.7 million in August 2002. It has added services and cut fares to generate demand for flying and to compete with British Airways and other full-service airlines.

Joe Gill, the head of institutional equity research at Goodbody Stockbrokers, said: "easyJet needs an average load factor of about 85 per cent in the second half to hit full-year forecasts. The debating point now is what type of yield environment can it see over the winter, where guidance is for flat year-on-year fares".

Ryanair's monthly passenger total has been higher than easyJet's since May, when it added services formerly operated by no-frills carrier Buzz, which it bought from KLM Royal Dutch Airlines.

In the past year easyJet has carried 20 million passengers compared with Ryanair's 18.6 million. Ryanair said this week it expected to overtake easyJet in the "next couple of months" and carry 24 million people in fiscal 2004.

Bmi's no-frills carrier, bmibaby, had its best month ever in August, carrying more than 300,000 passengers.

EasyJet shares climbed 4.75p to 258.75p. Ryanair shares rose 11p to 461.5p.