Ryanair has backtracked on plans to impose a pay freeze and announced yesterday that it intends to give staff a 3 per cent salary rise from April 1st, adding more than €3 million to its 2004 wage bill.

The announcement came less than four weeks after its deputy chief executive, Mr Michael Cawley, revealed that the no-frills carrier was considering a pay freeze for its 2,300 staff.

The increase will be back- dated to April 1st, the beginning of Ryanair's financial year. Overall, it will add €3.3 million to the airline's wage bill, bringing it to €119.8 million from €116.3 million. Ryanair has the highest average salary of any airline in Europe at €50,582, but its staff tend to work longer hours than their counterparts on other carriers.

Its statement said that the company's 500 pilots would get up to €2,000 a year extra. The pay rise will add over €1,500 to its average pay packet.

In recent years, Ryanair has given a pay rise at the beginning of April. However, chief executive Mr Michael O'Leary last night told The Irish Times that there was no entitlement to an annual pay increase in the company.

"In presentations to our own people was that whenever we see that things are not going to get any worse, the first people that would be looked after would be the staff, and that's what we are doing," he said.

He warned that it was not an indication that the airline was expecting an upturn in trading conditions. "There is going to be blood all over the walls," he said.

Mr O'Leary pointed out that fares had fallen by 30 per cent in the first quarter of the year but that the airline had managed to keep its margins at 20 per cent.

The publicly quoted airline has targeted unit cost cuts of 5 per cent this year.

Yesterday, Mr O'Leary said most of the necessary cuts were in place. It is currently bringing new craft into service. He said that they would operate at a lower cost than its existing planes.

Ryanair also released passenger figures for April showing that the airline carried 2,142,545 travellers during the month, a 45 per cent increase on the same month last year.

However, the load factor, that is the proportion of seats filled, was 82 per cent, up just 3 per cent on April 2003's return of 79 per cent.

The lower rate of growth in load factors was explained by the fact that Ryanair has increased the number of seats it is offering.

The Dublin market reacted unenthusiastically to the airline's announcements. Ryanair's share price closed over 3 per cent down at €4.38.