Ryanair has reported first quarter profits above expectations and has rejected market fears that future profitability will be hit by escalating oil prices.
Chief executive, Mr Michael O'Leary, acknowledged the company was only hedged until the end of October at the level of $26 (€21.56) per barrel. But he said when prices came down towards $30 a barrel, the airline would seek to hedge for as long as possible.
"Close to or below $30 a barrel we will hedge and as far out as we can," he said. "Prices could double to $80 a barrel and we would still be profitable," he told a news conference.
He said other airlines with less cash on their balance sheets would suffer more from a squeeze on oil. "I am generally optimistic now on oil prices. It is in our interests for oil prices to go higher - it will take out our competitors".
Speaking to The Irish Times, deputy chief executive, Mr Michael Cawley, said the airline would simply have to make savings in other parts of its operation to offset against rising fuel costs.
Despite fears of oil prices, the airline's results were generally welcomed by analysts. Operating profit was up 22 per cent at €64.8 million, above market forecasts of about €62 million. Earnings per share at 6.97 cents was up 21.6 per cent on the same period in 2003.
Operating margins slipped a little to 21.4 per cent compared with 21.6 per cent in the year before. Turnover increased 23 per cent to €302 million, ahead of most analysts forcasts of €292 million.
The company said it remained confident the airline industry was heading for a major shakeout. "I think yields are going to be under great pressure across the industry, possibly dropping by between 10 and 20 per cent," said Mr Cawley.
He said this would have a "devastating effect" on airlines,with even flag carriers like British Airways, Lufthansa and Air France coming under pressure. "There will be closures and there will be mergers, because there is a lot of spare capacity out there," he said.
He said the airline was still managing to drive down costs apart from fuel. He said the company envisaged no drop in passenger numbers and despite intense competition its turnover had held up well.
Mr Shane Matthews of NCB said there numbers were good and forecasts might be tweaked upwards slightly. "Encouragingly the business is still quite strong and the outlook is pretty much as expected. He pointed to the strength of the airline's ancillary revenues,which were up 40 per cent to €43.7 million. This area now accounts for 14 per cent of total revenues.
The next significant news from the airline will be its July traffic statistics which are due to be published tomorrow.
The company's shares were under pressure in early trading, but recovered later and closed down 1.8 per cent at €4.33. - (additional reporting by Reuters)
