Ryanair said that falling fuel costs had boosted profits but warned that cut-price fares would result in losses for the rest of the year.

The firm said pre-tax profits were 419.4 million euros (£376.6m) in the six months to September 30, from 105.2 million euros (£94.4m) last year, but said the results were "heavily distorted" by a 42 per cent drop in fuel costs.

Ryanair said this masked a 17 per cent decline in average fares and warned that prices would fall 20 per cent over the rest of the year, resulting in losses for the last two quarters.

It affirmed its forecast for full-year net profit at the lower end of a 200m to 300m euro range.

"The market expectations had been considerably higher than that," one Dublin-based trader said.

Revenue fell 2 per cent in the first half to 1.77 billion euros as the decline in fares outweighed a 15 per cent growth in traffic.

In August, Ryanair confirmed it was opening a base at Leeds-Bradford International Airport. It also announced plans to fly extra routes out of the airport, mainly to the western Mediterranean.

Yesterday, Ryanair spokesman Stephen McNamara said: "Leeds Bradford will become Ryanair's 34th base from March 2010. Ryanair is delighted with the booking on all routes to and from Leeds Bradford, but particularly on the 14 new routes which will begin in March next year. As expected sun routes have proved particularly popular and booking on all routes are ahead of target."

Ryanair said yesterday it still saw "massive" expansion opportunities, but analysts said it could not sustain a 15 per cent annual rate of traffic growth without cutting fares to such an extent that it would fail to make money.

"It's difficult to see how they can keep squeezing costs out of the business," said Panmure Gordon analyst Gert Zonneveld. "At the end of the day, you need your two pilots, you need a number of crew per aircraft."

Gary Fawcett, of Brewin Dolphin stockbrokers, which has an office in Leeds, said: "There really are only so many costs you can strip out. The market wants to see them grow revenue. They are still profitable, and that's a good place to be for the airline industry."

Ryanair said talks with Boeing on ordering 200 aircraft for delivery between 2013 and 2016 had not achieved much progress, warning that it could end its relationship with the US aircraft maker.

Chief executive Michael O'Leary said. "We see no point in continuing to grow rapidly in a declining yield environment, where our main aircraft partner is unwilling to play its part in our cost reduction programme.

"If we cannot invest our surplus cash efficiently in new aircraft, then we should distribute it to shareholders," said Mr O'Leary, who has so far stuck to building Ryanair's 2.5 billion euro cash pile further without paying any dividends.

Mr O'Leary, who has said Ryanair could stop growing beyond 2012 if no deal was reached with Boeing, has been hinting for months that he would be prepared to switch allegiance to Airbus.

Ryanair, which has thrived on consumers trading down in the recession, said it was still winning substantial market share from major flag carriers Air France-KLM, British Airways and Deutsche Lufthansa.

greg.wright@ypn.co.uk