Profits at top end of forecasts as Ryanair avoids turbulence

Europe's biggest low-cost airline faced a 37 per cent increase in its third-quarter fuel bill, but said it is on course to hit full-year net profits at the upper end of forecasts of between 325m and 340m.

The group is expanding its presence at Leeds Bradford airport and will have 21 routes for the summer season.

"We are working very closely with Leeds Bradford airport," said Ryanair's head of communications Stephen McNamara. "We're very happy with the success of the routes from the airport this year. They're continuing to book very well.

"We've got some fantastic routes such as Ibiza and Fuerteventura which we're confident about, we knew they would be strong out of Leeds Bradford, as well as bread and butter routes such as Dublin, Malta and Pisa."

The Irish carrier opened a base at Leeds Bradford last March with 17 routes.

Ryanair, which operates more than 1,500 flights a day, reported a loss for the final three months of last year after it was forced to cancel more than 3,000 flights.

Chief executive Michael O'Leary said the carrier had been expecting to break even in the third quarter but reported a net loss of 8.5m as strikes and severe weather grounded its aircraft.

A 15 per cent rise in average fares to 29, a 20 per cent increase in ancillary revenues, such as in-flight sales of refreshments and entertainment, and a six per cent hike in passenger numbers to 17 million helped offset the impact of strikes in Europe and heavy snowfall in the UK.

"This small third quarter loss is disappointing, as we were on track to break even, but earnings were hit by a series of air traffic controllers' strikes compounded by a spate of bad weather airport closures in December," said Mr O'Leary.

Rival airline easyJet said last week it would take a 31m hit from strikes and winter weather across Europe.

NCB analyst Murray McCarter said Ryanair's update was reassuring following easyJet's recent profit warning.

"In particular the strong increase in fares and ancillary revenues is impressive despite the challenging conditions through the winter," he said.

Airlines traditionally lose money in the third quarter which is the quietest period of the year for the industry.

The company said last month it would take legal action against Spanish unions over an ATC strike which forced it to cancel 500 flights.

Mr O'Leary said he expected passenger numbers and average fares to continue to benefit in the fourth quarter from a better mix of new routes.

The airline has offset weakness in the domestic economy by growing in lower cost markets like Spain and Italy.

Mr O'Leary said Ryanair had been protected from significant rises in oil prices in recent months by its fuel hedging strategy.

The airline is 90 per cent hedged for the fourth quarter at a price of $750 per tonne compared with the current spot price of $890 per tonne. Ryanair said it is benefiting from flag carriers being weakened by raising their prices through putting fuel surcharges on many short haul flights.

Ryanair's finance director Howard Millar said he expected that trend to continue in 2011.

"I think you'll see fuel prices move upwards for the industry. As part of that we expect flag carriers to put up fuel surcharges.

"That widens the gap between their fares and our fares," he said.

Davy analyst Stephen Furlong said Ryanair would be a beneficiary of current fuel prices.

"We still believe that Ryanair will be one of the key winners in this higher fuel environment, the key being that demand for its business model remains strong," he said.

Mr Millar said Ryanair is picking up market share and anticipated continuing to do so in the coming year.

"Ourselves and easyJet are the only two carriers of any size and shape growing this year and next year. The flag carriers have stopped growing and are continuing to retreat," he said.

Mr Millar said Ryanair would be interested in buying Ireland's 25 per cent stake in rival Aer Lingus should it be put up for sale by a new government looking to raise money through the sale of state assets after the forthcoming election.

Chief hits out at Euro regulations

Colourful Ryanair chief executive Michael O'Leary said he was surprised that recent commentary on the Irish economy had clouded analysis of Ryanair.

He said: "Ryanair has little exposure to the Irish economy."

He also took the opportunity to hit out at European regulations which require airlines to compensate passengers during widespread cancellations and heavily criticised the directives after the volcanic ash cloud crisis.

"It is inequitable that airports enjoy a boost to their restaurant and retail revenues from stranded passengers when their runways close, yet the airlines are obliged to pay for meals, drinks and hotels," he said.