Ryanair profits surge 55% but Michael O'Leary warns fares will continue to fall

Ryanair's first quarter profit surged on the back of strong summer bookings, but warned margins could come under pressure with air fares set to decline further in the remainder of the year.

In the three months to the end of June, pre-tax profit surged 55% year-on-year to €397m (£327m, $463m), exceeding forecast for a figure in the region of €342m. Revenue rose 13% from the corresponding period the year before to €1.9bn.

The budget airline added earnings for the year will be between €1.4bn and €1.45bn, in line with a previously issued forecast but higher than the €1.32bn recorded last year.

Passenger numbers also increased, rising 12% year-on-year to 35 million, while the load factor, a gauge of the number of seats filled on each plane, increased two percentage points to 96%.

Group chief executive Michael O'Leary hailed the performance but warned the later timing of Easter this year had slightly distorted the year-on-year comparison, boosting the quarterly performance.

O'Leary also warned that fares, which grew 1% in the period, will decline by approximately 5% over the summer mainly due to overcapacity. However, the low-cost airline expects to carry 131 million passengers over the 12 months to the end of March 2018, one million more than originally forecast.

The Ryanair chief also indicated the increase in fares was offset by the ongoing sterling decline and lower bag revenue, with more customers switching to the airline's two free carry-on bag policy.

The airline also warned it might be forced to cancel some flights from the UK to the EU and even move its hubs to Continental Europe, should Britain fail to remain in the EU Open Skies agreement post-Brexit.

"We, like all airlines, seek clarity on this issue before we publish our summer 2019 schedule in the second quarter of 2018," the Irish airline said on Monday, 24 July.

"If we do not have certainty about the legal basis for the operation of flights between the UK and the EU by autumn 2018, we may be forced to cancel flights and move some, or all, of our UK based aircraft to Continental Europe from April 2019 onwards."