Ryanair, Europe`s biggest low-cost airline, has reported a 26% drop in quarterly profit after it lowered fares and the price of fuel soared.

Net profit was 35m euros ($45.5m; £24m) in the three months ending 31 December, from 47.5m euros a year earlier.

Despite the fall, the earnings were better than expected and Ryanair was bullish about its prospects.

The Dublin-based carrier forecast that more of its competitors would go bust, helping secure future profit growth.

Shrinking market?

``As predicted, casualties continue in the European industry,`` said Ryanair`s chief executive Michael O`Leary, citing firms including Volare, VBird and Air Polonia.

He added that companies including Italy`s Alitalia and Scandinavia`s SAS have posted record losses, while others such as Hapag Lloyd Express, MyTravel Lite and Basiq Air ``have announced significant reversals of capacity``.

``This is not a temporary phenomenon resulting from high oil prices, but a permanent market shift towards low cost air travel,`` Mr O`Leary said.

Fuel factor

Ryanair`s passenger volumes during the October to December period grew by 13% to 6.9 million. Total sales climbed 15% to 294.4m euros.

Average revenues per passenger were unchanged in the third quarter compared with the same period a year earlier.

Crude prices, however, hit record levels last year, boosting the cost of jet fuel.

``Fuel prices remain high and will continue to impact our future guidance,`` said Mr O`Leary.

The company said that it has negotiated new fuel contracts and covered almost all of its exposure to world petroleum prices.

Trials

The airline was upbeat about its prospects for the full-year.

``We think we`ve had a very strong performance in the third-quarter and will be upgrading our full-year guidance to 246 million euros,`` said chief financial officer Howard Millar.

However, not so successful has been Ryanair`s trial of a new onboard entertainment service offering videos and music for £5 a flight.

The carrier said it may abandon plans to roll out the system to its entire fleet after a ``disappointing`` trial.

It blamed a lack of availability of non-English language content programmes.

Ryanair had hoped its passengers would pay £5 to watch Hollywood films, chart videos, cartoons and comedy classics as they flew.

Source: BBC News, Monday, 31 January 2005

BBC News

2005-01-31 11:29:44