Fuel costs hit Ryanair profit margin

Budget airline Ryanair has reported a 26% growth in passenger numbers, but has seen profits hit by high fuel costs.

In the third financial quarter, the airline said that it had increased third quarter profits to 36.8 million euro.

Traffic grew by 26% to 8.6 million passengers, whilst yields were almost flat, as expected, as total revenues rose by 27% to 370.7 million euro.

Overall costs increased by 3% as fuel costs rose by 59% to 114.9 million.

As a result of the higher fuel costs, Ryanair’s after tax margin, on an adjusted basis for the third quarter fell by 2 points to 10% as adjusted net profit increased by 6% to €36.8 million.

Ryanair Chief Executive, Michael O’Leary, said: “Ryanair’s lowest fare model, yet again, delivered increased profits and passenger growth for the quarter despite the intense competition and the drag on profitability of very high fuel prices."

He added: “Our fuel costs rose by 59% to €115m despite being almost fully hedged during the quarter reflecting the high fuel prices. We are hedged to the end of March 06 at rates equivalent to $49 per barrel. We are unhedged thereafter but continue to monitor forward prices with a view to hedging our future requirements for fiscal 2007 should an appropriate opportunity arise.

"Our view remains unchanged insofar as we expect that fuel prices will continue at these higher levels for some time.

Ryanair said that it would be seeking to continue measures to cut fares further, but will charge £2.50 per item of luggage placed in aircraft holds.

Mr O'Leary said that he expected competition to remain fierce, and remained "cautious" in his outlook for the remainder of the trading year.

Ryanair is adding a further 18 routes and five news aircraft to it's Dublin-based operation in April.

(SP)