Budget airline Ryanair has warned that surging oil prices will force average air fares up by 12% in the current financial year, while it will also cut winter capacity for the first time in its history.

The Irish carrier, which has a fleet of 272 planes, expects traffic to grow by 4% to 75 million passengers in the year to March 2012, but all of that growth will occur in the first half of the period.

The two winter quarters will see passenger numbers fall by 2% and 5% respectively as the airline expects to ground 80 planes over the coming winter, including 50 new jets to be delivered by Boeing.

Chief executive Michael O'Leary said the new aircraft will be "parked" at various airports around Europe until general economic conditions improve and there is more visibility on oil prices.

Mr O'Leary said: "The aim is to lose less money in the winter months".

Ryanair reported a 26% increase in underlying pre-tax profits to 319 million euro in the year to March 31, but cautioned earnings would be flat in the current year because of the impact of high fuel costs.

Mr O'Leary said the 12% fare increase in the year to March 2012 will only cover an expected rise in the fuel bill of 350 million euro, as the airline's hedging becomes more expensive.

The company's fuel bill rose by 37% to 1.2 billion euros in the last financial year as average oil prices increased from 62 US dollars a barrel to 73 US dollars.

But the group, which operates more than 1,500 flights per day, also added that higher oil prices would lead to "more airlines going broke", creating further growth opportunities.

Mr O'Leary said: "Higher oil prices will force competitors to continue to increase fares and fuel surcharges which makes Ryanair's lower fares even more attractive. In many cases competitors' fuel surcharges are higher than Ryanair's lead-in fares. Higher oil prices will lead to further consolidations, increased competitor losses, and more airlines going broke."