Ryanair First Quarter Profit Up 25 Percent

Ryanair's first quarter profit, for the three months to end June, was up 25 percent at EUR€245 million.

Ancillary revenue in the quarter was up 9 percent, lagging traffic growth of 16 percent in part due to lower charges for checked baggage following a decision to allow a second small bag in the cabin for free, chief executive Michael O'Leary said.

Ryanair said it will cut ticket prices aggressively this winter and lifted its annual growth target by a third to 12 million new passengers, heaping pressure on rivals who are struggling to compete on costs.

The Irish budget airline, which already carries more passengers than any other European airline, is planning "very aggressive pricing" with average fares set to fall by up to 8 percent in the six months to March 2016, O'Leary said.

The move comes days after higher-cost rival Air France-KLM said it would accelerate restructuring plans and Lufthansa announced new low-cost style fares in a sign it too is feeling the pressure.

Lufthansa said on Monday that its new fares to take effect from October will see customers pay extra depending on the amount of luggage, whether they wish to book a seat in advance, and if they need a flexible ticket.

The winter price cuts could also prove bad news for easyJet, which Ryanair is targeting in a major push to improve customer service and expansion into mainstream airports that it has traditionally left to its UK rival.

LOWER FUEL PRICES

Ryanair said profit after tax for the full year would be at the higher end of its forecast of EUR€940 million to EUR€970 million given in May.

It said it was being cautious due to poor visibility and that it was "too early in the year" to change its full-year profit guidance.

After previously warning that summer fares in the six months to the end of September could fall by up to 2 percent, the airline said it now expected them to be flat, giving it the financial firepower to be aggressive in the winter.

"We're going to use some of the slightly better (first-half) performance... to pass on very aggressive pricing so that we fill 15 percent capacity growth in the second half," O'Leary said in a video statement.

Lower fuel prices will also help, providing a reduction of 7 percent in costs per seat, he said.

The airline plans to ground 40 planes this winter compared to 50 last year and it expects to fill 90 percent of its seats, up from 88 percent last year, the company said in a statement.