Ryanair warns of oil pain

By Andras Gergely

DUBLIN (Reuters) - Ryanair warned high fuel costs would hit profits harder than previously forecast but said it was in a stronger position than European rivals and should avoid a loss this year, even if oil stays near recent highs.

Shares in Europe's biggest low-cost carrier rose 8 percent on Tuesday after the airline said it expected to break even, thanks in part to higher ticket prices, which, based on bookings so far this year, are expected to rise 5 percent.

Publishing its results for the year to the end of March, Ryanair said adjusted net profit rose 20 percent to 480.9 million euros (382 million pounds), compared with 401.4 million euros a year earlier and the 474.7 million average forecast from 18 analysts polled by Reuters Estimates.

Reflecting big falls in global airline stocks in recent months, Ryanair said it had written down the value of its stake in Irish rival Aer Lingus by 91.6 million euros.

That one-off loss on an investment built up during a thwarted takeover bid for Aer Lingus, along with other smaller exceptional items, meant its unadjusted net profit fell to 390.7 million euros from 435.6 million euros a year earlier.

Ryanair, whose fuel needs remain mostly unhedged for the current year, predicted oil would become cheaper over the medium term, helping its earnings rebound strongly, but it was not sure when this would happen.

"While Ryanair may go to breakeven, it means that the rest of the entire European industry will make massive losses," Chief Financial Officer Howard Millar said of the year ahead.

In tandem with its prediction that fares would rise 5 percent in the year to the end of March 2009, Ryanair said that if oil prices remained at $130 per barrel, it expected to break even during its current business year.