Continued growth in passenger numbers and tight cost control at Ryanair helped the airline to deliver a 6 per cent rise in third-quarter net profit despite higher fuel costs.
The low-cost airline reported net profit of €36.8 million for the three months ended December as passenger numbers grew by 26 per cent to 8.6 million and revenue rose by 27 per cent to €371 million.
But the airline sounded a cautious note about the fourth quarter although it has left its forecast of full-year net profits unchanged at €295 million.
"We expect to achieve significant increases in passenger volumes but also anticipate that yields in the fourth quarter will fall, reflecting our large capacity growth in this weakest winter quarter as well as the impact of Easter falling in April," chief executive Michael O'Leary said.
Ryanair expects yields to fall by between 5 and 10 per cent in the three months to the end of March after remaining broadly flat in the third quarter.
Although analysts described the results as "solid", shares in the airline fell by 2.6 per cent to €7.52 as investors continued to fret about the outlook for the airline, particularly after its fuel hedging runs out at the end of March.
Goodbody Stockbrokers noted Ryanair's fuel bill in the current year was equivalent to a price of about $52 per barrel and every $1 variation from that would cost it about $10 million in profits.
However, deputy chief executive Howard Millar noted that the airline coped well when it was unhedged from April to September last year at a time when oil prices ranged from $60 to more than $70 per barrel. He added that most of its rivals, including BA, were also going into the summer unhedged.
But Ryanair is keen to put some cover in place heading into the winter months when oil prices tend to be more volatile.
Meanwhile, the airline hopes continued cost-cutting will help to partly offset rising fuel costs, which were up by 59 per cent in the third quarter to €115 million. Despite this, overall costs rose just 3 per cent and if fuel is excluded, they declined by 6 per cent.
The airline expects to save a further €30 million annually in airport and handling costs following the introduction of its web check-in, luggage-only facility in March. It should also realise savings from the introduction of new, more fuel-efficient Boeing aircraft and from a new engine overhaul deal with GE.
Mr Millar believes Ryanair can also continue to grow its ancillary revenues, from areas such as travel insurance and car hire. In the third quarter, such revenue rose by 31 per cent to €59 million and now accounts for 16 per cent of total revenues against 15 per cent last year.
The airline, which said last summer that it expected to carry around 35 million passengers in the current financial year, remains on track to reach that figure despite some delays in route launches due to the recent Boeing strike. The launch of its new base at Nottingham-East Midlands, for instance, has been deferred from March to April due to late aircraft deliveries as a result of the strike.
In the 2007 financial year, it expects passenger growth of 20 per cent to 42 million, Mr Millar said.
