Cost-cutting helps Ryanair bounce back into profit

Ryanair insisted yesterday it could withstand a further oil shock, despite opting not to hedge against a winter of high fuel costs.

Ryanair insisted yesterday it could withstand a further oil shock, despite opting not to hedge against a winter of high fuel costs.

Michael O'Leary, the chief executive, was forced to defend the company's decision not to lock in oil prices beyond September, despite fears that the price of crude, which broke $44 a barrel yesterday, could continue soaring. "It's in our interests for oil prices to go higher. It will take out our competitors," Mr O'Leary said. "Prices could double to $80 a barrel and we would still be profitable."

The company, which unlike rivals such as British Airways has not imposed fuel surcharges, said its cost savings would offset higher oil prices. But its shares still slipped 8 cents to €4.32 on concerns about its exposure to high oil prices.

Mr O'Leary's comments came as Ryanair beat market expectations, with a 21 per cent rise in earnings in its first quarter to the end of June. The carrier, which shocked investors with its first loss in the previous quarter, said yields - essentially average fares - fell 6 per cent during the period to €39 (£26). It had predicted yields would fall by between 5 and 10 per cent.

The company stuck to its forecast that yields could fall up to 20 per cent during the winter, reiterating its warning that a number of its low-cost rivals would collapse as a result. Howard Miller, the finance director, said: "We will put a high amount of pressure on them as we move through the winter."

Passenger numbers rose 28 per cent to 6.6 million during the first quarter, helping pre-tax profits climb 28 per cent to €57.8m on sales up 23 per cent to €303m. Its net margin was flat at 18 per cent.