Ryanair has raised its annual profit forecast almost 20 percent, due to a surge in winter bookings and said it would cut fares by up to 10 percent in the new year to take more market share from struggling rivals.
The improved guidance comes after the low-cost carrier reduced fees, improved its web site and boosted its marketing budget after outspoken chief executive Michael O'Leary admitted excessive cost-cutting was scaring customers away.
It now predicts profit after tax for the year to March of between EUR€750 million and EUR€770 million, up from a previous forecast of EUR€620 million to EUR€650 million.
Higher cost rivals Lufthansa and Air France have both lowered their profit forecasts in recent days on increased competition and the cost of industrial action.
"We've had a bumper half year and we've had to boost our guidance as we got visibility on the second half of the year," O'Leary said in an interview.
"We are keeping prices low while improving the service. It's as simple as that."
STRONG WINTER BOOKINGS
The sale of 2 million more tickets than planned over the winter will consolidate the Irish airline's position as Europe's largest airline by passenger numbers -- boosting annual numbers to an estimated 89 million, up 8.5 percent over the previous year.
Ryanair said it plans to cut fares by up to 5 percent in the three months to December and by up to 10 percent in the first three months of next year.
A new business class fare unveiled over the summer, which provides a number of perks for an extra EUR€50, is expected to help drive bookings in the traditionally weaker winter season, O'Leary said.
The business product is being managed by new chief marketing officer Kenny Jacobs, formerly of Tesco and Moneysupermarket.com. The annual marketing budget has tripled this year to EUR€35 million.
Profit after tax for the six months to September, the first half of Ryanair's financial year, was up 32 percent to EUR€795 million.
A significant factor in the improvement was a change of policy to sell more tickets earlier, a policy which has reduced the number of empty seats on planes and increased last minute fares, O'Leary said.
Passenger numbers grew 4 percent in the first half and average fares were up 5 percent, helping to boost operating margins by 4 percentage points to 26 percent.
The airline said it had attempted to lock in recent falls in the price of oil, hedging 90 percent of its fuel needs for the year to March 2016 at around USD$93 per barrel and would try to extend that further in the coming months.
Ryanair confirmed on Monday that it faced Aegean in a second round of bidding for Cyprus Airways, but said the airline's five aircraft were not a major priority considering it was beginning to take delivery of 180 new Boeing 737s.
"If it comes it comes, if it doesn't we wont lose any sleep over it," O'Leary said.