Ryanair profits hit as fuel costs soar

Europe’s largest no-frills airline, Ryanair, has reported a 47% fall in profits during the first half of the financial year, due to soaring fuel costs and the economic downturn.

The Irish budget airline said net profits in the six months to September 30 stood at €214.6 million (£169 million; $277 million) compared with €407.6 million the previous year.

Despite the fall in oil prices, the carrier said it expects to make a loss in the second half of the financial year.

The price of oil has fallen from a high of $147 a barrel in July to around $65 a barrel currently, due to fears that a global recession will cut demand for oil.

Ryanair’s chief executive, Michael O’Leary, said that if oil prices remained below $80 a barrel then profits would recover.

He added that the company has a considerable cost advantage over its rivals, the majority of whom have hedged fuel next year at much higher levels than current market prices. This will force competitors to increase air fares further and widen the price gap between them and Ryanair’s lowest fares, explained Mr O‘Leary.

Meanwhile, Ryanair said it will cut average fares by between 15% and 20% to help boost demand during the remainder of the year.

Between April and September, the number of passengers flying with Ryanair grew by 19% to 32 million and despite the economic slowdown, it expects passenger numbers to grow a further 9% this winter, as travellers switch from full-service airlines.

Last week, Ryanair announced it would shut its base at Valencia, Spain with the loss of 70 weekly flights.

Airlines across the world have struggled as fuel costs soared earlier this year.

In September, XL Airways, the UK’s third-largest tour operator, ground 21 planes which resulted in 85,000 people stranded overseas. Other airlines that have gone out of business this year include ATA Airlines, Aloha Airgroup, EOS, Maxjet, Oasis, Silverjet and Skybus Airlines.

Meanwhile, major players in the industry such as British Airways, saw its profits plummet by 90% in the three months to August.

According to the International Air Transport Association (IATA), global passenger traffic fell 2.9% last month, while cargo traffic fell 7.7% compared to the same month in 2007.

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