Loss looming as Ryanair cuts fares

By Andras Gergely

DUBLIN (Reuters) - Irish airline Ryanair (RYA.I) warned on Monday it may make its first loss since 1989 because it will respond to high fuel costs and the threat of recession by cutting fares.

Europe's biggest low cost carrier said it expected to take market share by reducing ticket prices. Ryanair shares (RYA.L) lost more than a quarter of their value after the airline posted an 85 percent slide in first quarter net profit on Monday.

"The outlook for the remainder of the fiscal year which is entirely dependent on fares and fuel prices remains poor," Chief Executive Michael O'Leary said.

Ryanair said it would use the economic slowdown to cut fares and take business from rivals who don't enjoy the cushioning afforded by its 2.2 billion euro (1.74 billion pounds) cash pile.

"This downturn will provide enormous opportunities for strong, well financed airlines such as Ryanair to grow," the company said in a statement.

Ryanair's worse than expected first quarter performance and grim outlook forced analysts to slash their forecasts for the year but many agreed the airline was well placed to take a short term profit hit in return for a bigger slice of the market.

"We continue to believe that Ryanair has the strongest business model and balance sheet to withstand and benefit from this cyclical downturn," Stephen Furlong, analyst at Ryanair broker Davy, said in a research note.

Exane BNP Paribas analyst Geoff Van Klaveren said traditional airlines faced the double whammy of weaker demand from both holidaymakers and lucrative business travellers looking to save money.