Ryanair trims prices and seeks to dispel jet fuel fears

By Conor Humphries

DUBLIN, May 18 (Reuters) - Ryanair ‌is cutting summer ​air fares ​to woo wary consumers, it said after posting record annual profit, adding that the risk of jet fuel shortages has all but disappeared.

Europe's largest airline by passenger ‌numbers reported a slightly better than expected 40% jump in full-year profit on Monday ⁠but downgraded its forecasts on fare income owing to consumer concerns over the broader impact of the Iran war.

DISCOUNTING ‌TO MAINTAIN VOLUMES

"There is a little ‌bit of customer nervousness out there," Chief Executive Michael O'Leary told analysts on a conference call. "We're having to do a little bit of price discounting to keep the volumes going."

Ryanair forecast a ​mid-single-digit percentage fall in average fares year on year in the April-June quarter and broadly flat for July to September.

But that forecast is conservative, O'Leary said, adding that he expects a "reasonable ⁠surge" once the war ends.

FUEL SUPPLY RISK 'ALMOST ZERO'

O'Leary said that the risk of a jet fuel shortage forcing cancellation of flights in ​Europe this summer had dropped to "almost zero" thanks to production increases by refiners after securing alternatives to Gulf crude.

If the war does drag on, however, ​Ryanair would be squeezed by both weaker demand and higher ‌costs, potentially leading to a dip in profitability.

The airline has hedged 80% of its jet-fuel requirements for the year to the end of next March ⁠at $67 a barrel, less than half the current spot price. However, costs per passenger could still rise by a mid-single-digit percentage if fuel prices remain at current elevated levels.

Ryanair shares fell by 3% after the results were ⁠released, but they recovered to a gain of 5.5% by 1318 GMT after slightly more optimistic commentary on the ​analyst call.

O'LEARY NEARS DEAL TO EXTEND CONTRACT

The budget carrier has almost concluded negotiations on an extension to O'Leary's contract to 2032, including a 10 million share-option agreement, subject to performance targets. A previous share option scheme is set ‌to earn O'Leary as much as 100 million euros ($116.5 million).

O'Leary, 65, did not directly answer an analyst who asked if the extension would be his ‌last.

Ryanair's full-year post-tax profit of 2.26 billion euros was slightly better than a forecast of 2.2 billion euros ⁠in a company poll of analysts.

That excluded ‌an 85 million euro provision ​related to a fine from the Italian competition authority, which Ryanair expects to be overturned on appeal.

($1 = 0.8583 euros)

(Reporting by Conor HumphriesEditing by Thomas Derpinghaus, Kate Mayberry and ‌David Goodman)

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