Shares in Ryanair came under pressure yesterday amid concerns over rising oil prices combined with a warning from the airline's chief executive, Mr Michael O'Leary, of a hard winter ahead.

The stock dropped by 1.1 per cent to €4.50 and has now shed almost 10 per cent over a 10-day period. It dipped as low as €4.35 yesterday afternoon.

"We expect the very tough trading conditions to continue and be particularly difficult this coming winter," said Mr O'Leary yesterday.

His caution was underpinned by a report from Citigroup Smith Barney, where analysts foresee a weak winter for Ryanair due to "overcapacity, pricing pressure and unhedged fuel costs".

Ryanair is currently hedged on its fuel costs but this expires in November. As oil prices rise on the back of Russian production issues, this has led some commentators to revisit the airline's sensitivity to fuel costs.

Mr John Mattimoe of Merrion Stockbrokers said yesterday that a persistence in high oil prices could shave about €5 million of next year's earnings according to his forecasts.

Smith Barney pointed out however that even if Ryanair's prices were pushed down by 20 per cent later this year, the company would remain the most profitable airline in Europe.

Smith Barney has a price target of €5.50 on Ryanair, highlighting its "lowest-cost advantage, strong balance sheet and strong management team".

Ryanair is due to issue first-quarter results on Tuesday.

The airline has meanwhile granted a new tranche of share options to all of its permanent staff, with each employee to receive options worth at least €4,200. The grant, which is being made in addition to pay, will see shares being awarded to about 2,000 Ryanair staff at all levels of the airline. It is the second award under a five-year options programme.

The "strike price", or level at which the options can be exercised is €4.41, which is slightly beneath Ryanair's current value.

The price has been set, according to the airline's chief executive, Mr Michael O'Leary, to reflect Ryanair's current low share price.

Announcing the options grant to staff, Mr O'Leary said he wanted employees to "share in future increases of the share price".

The level of the grant will be calculated according to each Ryanair employee's salary, with the options to equate to, on average, 20 per cent of pay.

The options, if exercised, will attract capital gains tax of 20 per cent if the shares are subsequently sold at a higher price than €4.41.