AVIATION: Shares in low-cost airline Ryanair have fallen sharply for the second successive day after analysts at Credit Suisse First Boston warned that the airline may issue new shares to fund its aircraft purchase programme.

The shares have now fallen almost 9 per cent since they hit an all-time high of €7.10 (£5.59) at the end of 2001.

This is partly because Ryanair shares had already risen above price targets set by a number of brokers. But the latest weakness is being blamed on CSFB's suggestion that Ryanair may be planning a new share issue. Yesterday, the shares fell nine cents to €6.50 in heavy trading, after falling as low as €6.40.

Setting a €6.60 target for the shares and downgrading the stock from "buy" to "hold", CSFB said: "Our main short-term concern on the stock is that Ryanair is beginning to contemplate a new plane order for delivery post April 1st, 2004.

"This could be funded by internal sources. However, with the high share price, Ryanair may issue further equity."

The prospect of a share issue and the subsequent dilution may weigh on the shares, analysts have warned. A spokesman for Ryanair refused to comment.

Since it floated on the Dublin and Nasdaq market in 1997 and on the London market in 1999, Ryanair has regularly raised funds through share issues and to date has raised more than €400 million in four separate share placings.

These placings have usually been accompanied by share sales by chief executive Mr Michael O'Leary, the Ryan family and Mr David Bondermans's Irish Air limited partnership.

Ryanair advertised last August to buy up to 50 second-hand Boeing aircraft, but the effect on the airline industry of the events of September 11th has substantially reduced the potential costs.

With a strong balance sheet, and with forecast net cash of more than €240 million in March 2002, Ryanair has no obvious need to raise equity funding for its aircraft purchase programme, say analysts. ...