New routes boost Ryanair profits

Frankfut-Hahn hub powers growth at Europe's second-largest low-cost carrier

DUBLIN, Republic of Ireland (CNN) -- Europe's second biggest budget airline Ryanair has said profits soared as it added new routes and took on the continents' established carriers with cheaper fares.

Net income climbed 68 percent to 39 million euros ($38 million) in the first three months of its financial year ended June 30, as revenue rose 29 percent to 194.3 million euros. Earnings per share rose 61 percent to 5.16 euros, the company announced on Tuesday.

Ryanair (RYA) and its bigger rival EasyJet (EZJ) have been adding routes and opening new bases as demand for low-cost travel takes off, while traditional carriers like British Airways (BAY) and Deutsche Lufthansa (FLHA) have been forced to cut routes, ground aircraft and sack staff to cope with the fallout from the September 11 attacks on the United States.

British Airways has already cut the cost of fares on 108 European routes to better compete with low-cost airlines. And now Lufthansa, Europe's second-largest airline, has also begun to lower prices as Ryanair muscles into the German market with the opening in February of its base in Frankfurt-Hahn Airport.

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"This record increase in Ryanair's quarterly profits is a direct result of the key elements of our unique low fares model,'' Chief Executive Michael O'Leary said in a statement. "Firstly very strong traffic growth in all our new and existing markets, secondly extremely disciplined cost-management, and thirdly using these lower costs to drive down airfares for our customers.'

"Our traffic growth during Q1 (first quarter) was outstanding, with high load factors on all 10 routes to/from our new German base at Frankfurt Hahn."

But the company, which saw passenger traffic rise 38 percent over the three-month period, warned profit growth at current rates may not continue.

"Whilst we have enjoyed a very strong first-quarter much of this exceptional profit growth is due to the impact of the launch costs of many new routes... We will not repeat a 68 percent growth in net profits in Q2, and going forward expect to see profit growth running in line with previous guidance for the remainder of the year,'' O'Leary added.

The company has said it expects traffic to grow by 30 to 35 percent per year over the next two years before "steadying back" to 25 percent per year.

Ryanair was toppled from the No.1 spot when rival EasyJet completed the acquisition of Go-Fly last week.