No-frills airline Ryanair yesterday ruled out copying its rivals by passing on the soaring cost of fuel to customers as it posted a better-than-expected 80 per cent rise in net profits, but warned of difficult trading this winter.
Ryanair treasurer Jimmy Dempsey said the Dublin-based carrier had no plans to follow in the footsteps of competitors such as BA and Virgin in introducing fuel surcharges.
"We have guaranteed to our passengers that we will never put a fuel surcharge in place," Mr Dempsey said.
Ryanair announced first quarter profits above analysts' expectations, with operating profits of 136.7 million euros (£93.6 million), higher than the indicated range of 120 million euros to 127 million euros (£82.1 million to £86.9 million). Net profits came in at 115.7 million euros (£79.2 million), also higher than expected.
The inclusion in the first quarter of the Easter holiday break, which this year fell in April, contributed to the improved profitability.
The airline also benefited from the introduction of many more "sun" destinations, increased business due to competitors' fuel surcharges, the initial impact of its baggage charging initiative and the earlier launch of new bases and routes.
"These are strong results, beating all expectations," wrote John Sheehan, analyst at NCB Stockbrokers.
"Despite a cautious outlook, they underline Ryanair's competitive strength. We expect the stock to move forward on these results, see the group as well-placed for the year and maintain our 'buy' rating and nine euro price target."
However, Mr Dempsey said the group was staying cautious about the outlook for the remainder of 2006-07 due to high fuel costs, which rose by 52 per cent to 167.5 million euros (£114.7 million) during the quarter, and the impact of its expansion plans.
Ryanair is now 90 per cent hedged to the end of October at $70 a barrel and 90 per cent hedged for November and December at $74 a barrel, but remains unhedged for the January to March 2007 quarter.
Finance director Neil Sora-han said he did not think the company was being too cautious.
"Fuel is a very real worry for at the moment. If we were to see a pull back in fuel prices, then maybe things could be a bit better than forecast. Fuel is just the big unknown now."
The carrier also plans to increase its fleet by 27 aircraft and to announce two new bases over the coming months with launch dates in early 2007, as well as expanding existing bases.
Mr Dempsey said the airline is talking to a number of airports in regions where it does not currently have a strong presence, but declined to give further details.
"There's a considerable step-up in capacity coming and we're cautious about our performance during the winter, given fuel prices," he said.
Chief executive Michael O'Leary said earlier that yesterday's results reflected a much stronger yield environment, despite substantially higher oil prices.
However, he added that he did not expect to maintain the buoyancy "at similar levels during the second quarter or indeed the second half of the fiscal year."
He said the group may sustain losses in the fourth quarter if oil prices rise above $74 a barrel, although the airline is maintaining its previous guidance of between five to ten per cent net profits growth for 2006-07.
Mr Dempsey said: "We would anticipate that the yield increase in the first quarter will track slightly up in the second quarter, but not significantly higher than one to two per cent."