Page last updated at 09:15 GMT, Monday, 2 November 2009

Ryanair may halt 'rapid growth'

Michael O'Leary threatens a 'change of strategy' after discussions with Boeing

Irish budget airline Ryanair has said it may stop expanding its business if it does not get a better deal on new aircraft from Boeing.

It is in talks with Boeing about buying 200 aircraft, but says if prices are not cut it will return cash to shareholders instead of buying planes.

The warning came with the announcement of 300% growth in six-month profits.

Pre-tax profits came in at 419.4m euros ($619.4m;£376.2m), up from 105.2m euros in the same period last year.

Ryanair said that its results were distorted by a 42% fall in fuel costs, but added that its average fare had fallen by 17%.

While the profit figure showed impressive growth from the first half of 2008, it was still 9% below the level from the same period of 2007.

'Stupid taxes'

It warned investors that it planned to cut average fares by about 20% in the next six months, which would mean it would make a loss for the second half of the year.

But it maintained its forecast for profits in the full year.

Ryanair reported its first annual loss last year, hit by rising fuel prices.

Mr O'Leary took the opportunity to criticise "stupid tourist taxes" and high airport charges, saying that he planned to switch some of his winter capacity to lower cost countries such as Belgium, the Netherlands, Italy and Spain.

The airline said that market conditions were still "difficult" with "an absence of consumer confidence".

It said its strong traffic growth had been at the expense of lower fares and added that the weakness of sterling had also hit its profitability.

Plane truth

Ryanair's passenger numbers rose to 36.4 million in the six-month period, up 15% from the same period last year.

The airline is in talks with Boeing about an order for 200 new aircraft to be delivered between 2013 and 2016.

It is renowned for its hard bargaining with suppliers and its message to the planemaker is clear.

"We won't continue these discussions indefinitely and have signalled to Boeing that if they are not completed before the year end, then Ryanair will end its relationship with Boeing and confirm a series of order deferrals and cancellations," Mr O'Leary said in the results statement.

"We see no point in continuing to grow rapidly in a declining yield environment, where our main aircraft partner is unwilling to play its part in our cost reduction programme."



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