Ryanair Holdings Plc, Europe's biggest discount airline, reported first-quarter profit fell 85 percent, missing analysts' estimates, and said it may post its first-ever full-year loss because of increased fuel expenses.

Net income excluding write-downs dropped to 21 million euros ($33 million) in the three months ended June 30 from 138.9 million euros in the same period a year earlier, the Dublin-based carrier said in a statement. Analysts had predicted profit of 50.9 million euros. Sales rose 12 percent to 777 million euros, also missing estimates.
Ryanair, struggling with record oil prices and a slowdown in consumer spending, expects an annual result of between breakeven and a loss of 60 million euros. The carrier predicted yields, or average ticket prices, could fall as much as 5 percent in the full year as it lowers fares. Ryanair had previously said it would probably break even this fiscal year.
``They're certainly more negative on the outlook,'' said Neil Glynn, an analyst at NCB Stockbrokers in Dublin with a ``hold'' rating on the stock. ``The drop-off in yields is quite worrying. It might signal some weakness in last-minute bookings. It does suggest a lesser ability to pass on fuel costs to the passenger than the market would have anticipated.''
Ryanair, which fell 1.9 percent to 3.23 euros on July 25, has dropped 30 percent this year.
The carrier is planning to ground planes this winter and has frozen pay for senior management. Ryanair already has the highest operating profit margin among European airlines. Fuel, which has historically been discount carriers' biggest cost, has also become the largest expense for network airlines such as British Airways Plc, according to analysts at Merrill Lynch.
``The emerging economic recession in the UK and Ireland caused by the global credit crisis and high oil prices means that consumer confidence is plummeting, and we believe this will have an adverse impact on fares for the rest of the year,'' Ryanair Chief
Executive Officer Michael O'Leary said in the statement today. British Airways, Europe's third-biggest airline, has said breaking even this fiscal year would be a ``considerable achievement'' amid record oil prices. EasyJet Plc, Europe's second-largest discount carrier, said last week fiscal-year pretax profit may fall as much as 46 percent because of higher fuel expenses.
``We now think that consumer confidence has started to weaken,'' Ryanair Chief Financial Officer Howard Millar said in an interview. ``The airlines now are unrealistic if they predict fares or fuel surcharges to increase.''
Ryanair, which was largely unhedged for the first quarter, has now hedged 90 percent of its fuel needs for September at $129 a barrel and 80 percent for the third quarter at $124 a barrel. O'Leary said in May that he wouldn't hedge until oil prices fell below $100 a barrel.
Ryanair's adjusted first-quarter earnings exclude a 17.9 million-euro write-down on 15 aircraft and a 93.6 million-euro writedown on a stake in Aer Lingus Group Plc, Ireland's second- biggest carrier.
(Source: Bloomberg)