Price wars forecast to ground airlines

By MICHAEL HARRISON

Ryanair, the low-cost Irish airline, has warned of a "bloodbath" among European carriers after reporting its first quarterly loss since flotation seven years ago.

Losses in the final quarter from January to March were €3.5 ($6.85) million. The three-month loss helped contribute to Ryanair's first fall in annual profits for 15 years.

It came after a year in which the airline's average fares fell 14 per cent and the industry as a whole was riven by surging fuel costs, the war in Iraq and threat of terrorist attacks.

Net profit fell 14 per cent to €206.6 ($404.2) million, down 14 per cent from a year earlier.

Sales increased 28 per cent to €1.074 billion ($2.10 billion) from €843 million.

Michael O'Leary, Ryanair's chief executive, predicted that Ryanair's own fares would fall by another 5 to 8 per cent this year.

"It's a bloodbath out there and it's going to continue. It's a very shitty marketplace with fare wars breaking out all over the place.

"But we look forward to that because we remain convinced that the lowest-cost operator will win."

O'Leary said with most rival airlines losing money, some would go bust this winter and more would fail over the next two years, meaning that only Ryanair and perhaps one other low-cost operator would survive long-term.

The Ryanair chief shrugged off its first quarterly loss since becoming a public company, saying "we don't walk on water".

He also guaranteed that Ryanair would not impose a fuel surcharge this year or next, saying that even if the cost of aviation fuel were to double, the airline would still be profitable.

Ryanair's helter-skelter pace of expansion will slow over the next 12 months although the airline still expects to increase capacity by 16 per cent, take delivery of a further 27 Boeing 737-800 jets and open two new bases in Europe.

Compared with Ryanair's forecast that fares could fall up to 20 per cent this year, the airline appears more sanguine now that it has sold half its seats for the summer.

- INDEPENDENT