Europe Weakness Hits Ryanair Profits

Ryanair, Europe's biggest budget airline, announced a profit slide of 29 percent in the three months to June as it grappled with a toxic mix of austerity, recession and stubbornly high fuel prices.

The Dublin-based airline, which is waiting to hear whether EU regulators will approve its takeover of Aer Lingus, said the weak economic outlook for Europe would continue to restrain fare growth for the rest of the year.

The airline maintained its forecast of a profit of between EUR€400 million and EUR€440 million for the year to March. Net profit for three months to June was EUR€99 million.

The airline, which has a lower cost base than many of its competitors, said it had hedged 90 percent of its fuel needs for the year to March at approximately USD$1,000 per ton. That is up 21 percent on last year, but lower than current market prices.

The cost of the remaining 10 percent will be lower than expected at the start of the year, but this saving will be more than offset by a worse euro to dollar exchange rate, the company said in a statement.

Average fares were up 4 percent, in line with mid-single digit growth forecast by the airline in May, and were on track for average growth of around 3 percent in the year to March, Millar said.

The airline will go ahead with already announced plans to ground 80 of its 270 planes over the winter due to high fuel costs, Millar said.

However, it sees potential for further increases in capacity in the key summer season. Its offer for rival Aer Lingus aims to take advantage of its premium network of airports in Europe which complements its own lower-cost regional network.

Last week, the European Commission, which acts as EU competition watchdog, said it would decide by August 29 whether to clear Ryanair's USD$841 million bid for Aer Lingus.

Ryanair said it would not comment further. Poor weather in the United Kingdom boosted sales at budget rival easyJet in the three months to June, pushing revenues up by 10.5 percent.

Ryanair, has roughly half as much exposure to the United Kingdom. Most European carriers continue to struggle with high fuel costs, weak consumer confidence and the euro zone crisis.