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Ryanair issues second profits alert

Low-cost airline Ryanair warned its profits will be hammered this winter by downward pressure on fares.

The Dublin-based carrier expects a 9% drop in average fares for the current quarter and a possible decline of 10% in the three months after Christmas.

Issuing its second profits warning in as many months, Ryanair said its surplus for the year to March 31 may dip to as low as 500 million euro (£423.3 million), from the 569 million euro achieved a year earlier.

For the period to September 30 - a period when airlines make most of their money - Ryanair recorded profits growth of 1% to 602 million euro (£509.7 million).

Average fares fell by 2% in the half year, although revenues from areas such as the roll out of reserved seating, priority boarding and higher credit debit card fees grew by 22% to 713 million euro (£603.7 million).

The airline also announced it will move to fully allocated seating on all Ryanair flights from February. Passengers who do not pay five euro (£4.23) to select their seats will be allocated them during the 24 hours prior to the date of departure. It said the policy was in response to customer feedback.

The airline, which is led by chief executive Michael O'Leary, also cut its profits guidance in September, when it said it expected to make around 570 million euro (£482.7 million) for the current financial year.

It said today that p assenger numbers in the six months to September 30 rose by 2% to 49 million, reflecting the opening of seven new bases and 116 additional routes. Its full-year target is for just under 81 million passengers.

In the face of weak market conditions, it has launched a number of " aggressive seat sales" in order to stimulate bookings across all markets.

This resulted in a 6% rise in October traffic although with pricing remaining weak due to competition and difficult economic conditions it expects it will have to promote low fare seat sales throughout the rest of this financial year.

Ryanair's shares were down by more than 10% in Dublin, while rival easyJet fell 4% on London's FTSE 100 Index. Tour operator Thomas Cook declined 2%.

Mr O' Leary has attempted to reinvent the image and reputation of Ryanair by relaxing bag restrictions for passengers as well as through a reduction in baggage charges and an easing of booking conditions.

The company said: " After 20 consecutive years of rapid growth, the next 12 months will see a brief pause in traffic growth, along with stable load factors.

"We intend to use this period to further improve our industry-leading customer service."

Ryanair is due to take delivery of 175 new Boeing aircraft from September next year.

Brenda Kelly, senior market strategist at IG Index, said: "The concept created by Ryanair of low cost flights has to a degree been cannibalised by other airlines and has thus made the competition in this space fiercer than ever.

"When you have the likes of Aer Lingus and easyJet all vying for the same business it's not difficult to see where the profit is flowing."

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