Ryanair's prediction of up to €300 million profits next year seems cautious, writes CIARÁN HANCOCK

GIVEN THE economic backdrop, the volatility of fuel prices and continued attrition in air fares, Ryanair produced a good set of results yesterday.

An after-tax profit, before exceptional costs, of €105 million was no mean feat at a time when most airlines around the world are losing their shirts.

This was achieved in spite of a 59 per cent rise in fuel costs as the no-frills airline got its call on oil prices spectacularly wrong in the first half of 2008.

Only the disastrous investment in Aer Lingus, which again had to be written down, pushed Ryanair into the red on its bottom line.

This year will be even better, with Ryanair predicting profits of between €200 million and €300 million. It’s some way off the €481 million surplus of 2007/08 but well ahead of anything that its major rivals in Europe will produce.

It expects to shave €450 million off its fuel bill this year due to falling oil prices and a strong hedging position.

Michael O’Leary was even bold enough to declare in London that he might bid for German giant Lufthansa – a neat stunt that garnered acres of publicity for Ryanair.

Yet there is a feeling that O’Leary has lowballed this year’s profit projection in an attempt to temper investor expectations.

The Mullingar resident has long been a master of under-promising and over-delivering.

Around this time last year, O’Leary said Ryanair would be lucky to breakeven at best in the 12 months to the end of March 2009. Yet Ryanair ended up with an after-tax surplus of €105 million.

Ryanair’s profit projection for the current year is based on average air fares declining by 15-20 per cent. This would be at least twice the 8 per cent fall in fares recorded in the financial year just passed.

In a note to clients, Bloxham analyst Joe Gill has pencilled in a 10 per cent decline in average fares to give an earnings figure, before interest and tax is deducted, of €520 million.

Even allowing for deductions of about €150 million in interest and tax, this would still leave Ryanair with a surplus well above guidance. “This is another attempt to temper expectations which will undoubtedly be the subject of lively debate,” Gill added.

Even Davy, Ryanair’s broker, said the net profit forecast for fiscal 2010 was “very cautious”. It would be no surprise if they were to be proved correct in their assessments.