Ryanair, Europe's largest low-cost airline, posted an above-forecast 21-percent rise in first-quarter earnings on Tuesday but stuck with its prediction of a winter fares war which would cause an industry shake-out.
The Irish-based carrier, which has been slashing ticket prices to fill seats amid cut-throat competition, reported adjusted earnings per share (EPS) of 7.0 euro cents in the three months to end-June.
The average EPS forecast in a Reuters survey of Dublin-based analysts was 6.65 cents.
Adjusted after-tax profit was also up 21 percent, at 53.1 million euros ($64.08 million), while total revenues rose 23 percent to 302.8 million euros.
Deputy Chief Executive Michael Cawley told Reuters he was pleased the results were in line with what the airline had predicted for itself but said a 6 percent decline in yield - essentially average fares - was never going to be a cause for celebration.
"The winter is not upon us yet and it's going to be the period of most yield attrition, so we have to watch that," he said in an interview.
He said there were already signs confirming the "bloodbath" predicted by Ryanair earlier this year would occur in the winter as budget airlines fought for business by chopping fares.
Cawley said he was confident Ryanair would emerge "stronger, unscathed and in pole position" from any such battle.
He said summer volume bookings were "reasonably good" so far, with the airline's two new bases at Rome Ciampino and Barcelona Girona doing particularly well.
"They're a key indicator of how the overall is going but yields are still the issue."
Ryanair makes around half of its annual profit in its second quarter ending September 30.
Ryanair's 6 percent decline in first-quarter average fare yield from the same quarter of 2003 was at the lower end of a 5-10 percent range indicated in guidance earlier in the year.
The airline said its guidance for yield remained unchanged, with a decline foreseen in the second quarter of between 5 and 10 percent, and between 10 and 20 percent in the winter.
Analysts welcomed the first-quarter performance.
"This is a good set of numbers," said Shane Matthews at Dublin-based NCB Stockbrokers.
"Encouragingly, the business is still quite strong and the outlook is pretty much as expected," he said, adding he expected his brokerage to tweak its full-year estimates slightly higher. On oil prices Ryanair said it remained fully hedged only until the end of the second quarter.
"We believe that over the medium term prices will fall and therefore it would be unwise to lock in at the current high rates," the company said, adding it would offset higher oil prices with cost savings elsewhere.
The airline said it expected passenger volumes this year to grow around 20 percent and its load factor - the proportion of seats filled - to increase.
In the first quarter, unit costs fell by 4 percent, while the net margin after tax remained stable at 18 percent. Passenger volume grew 28 percent to 6.6 million.
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