Ryanair chief executive, Mr Michael O'Leary, has welcomed EasyJet's new services from Shannon, Knock and Cork but warned that it would be turning its firepower against its rival in the hope of banishing it back to the UK. Siobhán Creaton, Finance Correspondent, reports.

Addressing shareholders at the airline's annual general meeting in Dublin yesterday, Mr O'Leary, predicted that EasyJet would ultimately abandon its new routes, as Go and other British airlines had in the past, in the face of a bitter onslaught from Ryanair. "We can't wait to welcome the sixth candidate from the UK that has come to liberate the people of the west of Ireland. They will follow in a long line of others who have left," he said.

Ryanair, which already operates on these routes, would win this battle through its "compelling package of price and service", Mr O'Leary said.

The airline, which lost a third of its stock market value in February after it issued a shock profit warning, told investors the bitter fare war that has erupted across Europe would continue and it may be some time yet before the share price recovered.

"The share price performance has not been that impressive since the profit warning but the market will improve. The bloodbath will continue and the lowest cost provider will win," he told the meeting.

Ryanair chairman Mr David Bonderman said it had been a very difficult year for the airline industry worldwide with the situation in Iraq and high oil prices but that the Irish airline retained the highest profit margin of any airline in the world and had continued to expand.

It has offered massive seat sales in a bid to boost the numbers travelling during the winter months. Mr O'Leary said the free seat giveaway had filled to capacity for October and November already. Ryanair predicts that it will carry 27.5 million passengers this year and that this will rise to 30 million within the next couple of years.

The chief executive said the airline would continue to campaign for a lower cost base in Ireland, namely the building of a low-cost terminal at Dublin Airport.

Yesterday, the Ryanair board decided it would not hedge forward its fuel costs while oil prices remained at between $40 and $45 a barrel. The airline has no hedging in place beyond the end of October and intends to wait until prices drift back to lows of about $30 a barrel to lock into a new arrangement.