ANALYSIS:RYANAIR BOSS Michael O'Leary must wish now that he'd hedged the airline's fuel costs when oil started trading at $100 a barrel last year, writes Ciarán Hancock.

At the time O'Leary wouldn't entertain the idea - now he'd bite your hand off.

If Ryanair had hedged at $100 a barrel, it would be on target this year to achieve profits of about €350 million.

Granted this would be some way off the €480 million in after-tax profits it posted in the year to the end of last March, but it would be a far better position than it currently finds itself in.

If oil stays at its current level of €130 a barrel, Ryanair will break even in the current year - and then only if it manages to increase fares by an average of 5 per cent.

Hindsight is 20/20 vision and O'Leary isn't the only senior business executive to have called it wrong. But it should be noted that many of his European rivals, including Aer Lingus and EasyJet, put in place hedges at $70 and $80 a barrel.

That said, breaking even is still a better place than most airlines will be come the end of the year. The airline industry as a whole is forecast to rack up eye-watering losses of $6 billion in the current year.

About 24 airlines have already gone bust in the past six months and others will follow.

O'Leary has confidently predicted that Ryanair will be left flying when the dust finally settles on the industry. He is most certainly right. Ryanair has cash balances of €2.2 billion and probably the most fuel-efficient fleet in Europe's skies at present.

His cost base is the leanest in the industry on this side of the Atlantic and he is being offered deals at mainstream airports - Edinburgh and Birmingham being two examples - that previously weren't on the table.

O'Leary has also previously used periods of weakness in the industry to good effect.

He never tires of telling how he squeezed Boeing for a fantastic deal on new aircraft in the aftermath of 9/11 when virtually no other airline was in the market for new jets.

The current environment is as challenging as anything O'Leary has previously faced. The price of oil is entirely out of his hands and no amount of brash marketing or PR stunts will change that.

If the price continues to surge, then Ryanair, like its rivals, will be operating in the red.

His cost base has pretty much been trimmed to the bone, so there are few areas left to cut.

Rising oil prices have already fed through on fares for most carriers, be it in baggage charges or fuel supplements.

Ryanair, despite its PR campaigns, is no different.

This drip, drip effect on pricing is bound to affect consumer confidence, which is already rattled by the economic slowdown and, in the UK, the weakness of sterling against the dollar.

The days of the cheap short-hop city break - Ryanair's bread and butter - could well be at an end.

Ryanair won't be unaffected and O'Leary might have to longfinger plans to double passenger numbers and profits by 2012.

These are turbulent times and O'Leary will need all his experience and guile to guide Ryanair safely through to calmer skies.