RYANAIR, the low-fare, no-frills airline, appears to be coming to the markets at a good time.

Equity markets are strong, if volatile; the performance of the international airline industry has improved significantly in recent years; and the outlook for the sector appears to be reasonably positive.

Against this background and because the fund-raising is relatively small, aiming to raise £90 million to £106 million in Europe and the US, the flotation should attract investor interest. While investors will have to assess carefully the outlook for Ryanair in very competitive European airline markets, the airline has achieved six years of profits growth in difficult markets and against bigger and stronger competitors.

Ryanair's low-fare/low-cost strategy is designed to stimulate increased passenger traffic while generating profits for the airline's shareholders. After a slow start and heavy losses, it has been profitable since 1991. The company turned the corner after a major restructuring and a clampdown on costs.

Passenger numbers have increased from 700,000 in 1991 to three million, revenues have grown from £50 million to £136 million and profits have jumped from £0.3 million to £26 million. In 1991, Ryanair had accumulated losses of almost £20 million since its foundation in 1986.

The key elements of company strategy are cost control and revenue growth. Ryanair has modelled itself on the highly successful US low-price carrier South West Airlines, refining that company's methods for the European market. Low fares stimulate massive increases in traffic, according to the chief executive, Mr Michael O'Leary, while growth in passenger numbers boosts income from other services such as duty-free sales and car hire.

Can profit growth continue? Ryanair is confident that it can. On the plus side is strong economic growth in Ireland and Britain which creates demand for leisure travel; and deregulation in European markets since April which will allow Ryanair to get into new markets and expand its routes.

The company is clear about its focus: the provision of no-frills point-to-point air transport on time at low prices. The formula has been successful in expanding the market, and the key to making the operation profitable has been the constant drive to keep costs down.

Ryanair drives bard bargains with airport owners, offering to create markets for the airports and to double their traffic levels in return for long-term low-cost contracts. The same approach is taken on maintenance contracts, while staff pay is heavily performance/productivity-related. About 80 per cent of its total cost base is amenable to management control, according to Davy Stockbrokers.

Through this formula, Ryanair has come from being essentially a one-route (Dublin-London) airline in 1992 to a 13-route airline.

Future growth will stick to the same formula, aiming for revenue growth in the 20 to 30 per cent range annually.

Eight second-hand aircraft have been ordered, with four to be delivered this summer and four more next year, so capacity is Unlikely to prove a constraint to growth. This month the company added services between Dublin and Paris, Brussels and Bristol. Next month it will fly between London (Stansted) and Stockholm and London and Kerry.

On the risk side, Ryanair faces an increasing number of competitors in the low-price end of the market and its fleet will need replacement in coming years. In addition its depreciation and maintenance costs will rise substantially as its fleet grows. But a successful flotation will wipe out company debt (currently at £35 million), putting Ryanair in a strong position to buy new aircraft.

Ryanair shares are expected to float in a target range of 165p to 195p, putting the company on a historic price earnings ratio of about 12 times and a prospective ratio of 10.5 to 12 times when bonus payments and higher depreciation and maintenance costs are taken into account.