Ryanair will break even at $100 a barrel oil

Irish low-cost airline Ryanair said it would break even in the current year if oil stays at $100 a barrel, and would return to "substantial profitability" next year if the price continues to fall.

Europe's biggest budget carrier said in late July it expected a full-year result between breakeven and a loss of 60 million euros.

Ryanair's shares rose over seven percent today following the improved guidance.

However, Chief Executive Michael O'Leary warned shareholders that savings on cheaper fuel this year may be offset by declining passenger numbers as "economies go into recession and consumer confidence plummets".

"While ... profitability declines steeply in the current fiscal year, our cost-reduction programme and significantly lower oil prices -- if they persist at under $100 per barrel -- should lead to a return to substantial profitability in the next fiscal year," he said today as oil traded around $100.

Mr O'Leary said while he had "screwed up" by not hedging the airline's fuel needs at under $100 barrel, he hoped the lower fuel prices would help and added the carrier was still unhedged for the fourth quarter.

"We are unhedged beyond the end of December -- that is the right place to be," he told reporters after the company's annual shareholder meeting.

"We are looking at whether we should hedge at $100 a barrel but our view is frankly that oil is going to fall further because the economic downturn this winter is going be extremely severe."

Mr O'Leary said at $100 a barrel that "could add anything to reduce our costs by 300 million euros next year".

"The question is how much of that will we have to give away in lower fares," he said.

Ryanair's shares were up 5.2 percent at 2.69 euros by 3.50 p.m., outperforming a 0.1 percent drop on the Irish market. It shares in London were 3.8 percent higher.

Mr O'Leary echoed the industry view that a run of airline bankruptcies was set to continue.

"We believe there will be further airline bankruptcies in Europe over the coming weeks, as more of Europe's non-viable, loss making airlines run out of cash or their credit facilities are withdrawn," he said.

Mr O'Leary said Ryanair had no plans at the moment to make another bid for rival airline Aer Lingus after his move last year was blocked by the European Commission on competition grounds.

He added the strike by machinists at US plane maker Boeing could cause some opening delays for new bases planned for spring 2009.

"We may have to delay some of the base launches by a month or two maybe from April to May," he said. "But we think the aircraft deliveries won't be hugely affected by even a 6 or 8 week stoppage."