Ryanair today reported its first fall in profits in five years on intense competition in European short-haul routes, but said higher average ticket prices this summer would help lift profits by up to 20% in the coming year.

Its shares ended the day 10.6% higher in Dublin trade after publication of the results.

Ryanair today reported a full year net profit of €523m - a drop of 8% on the previous year but ahead of the airline's guidance. 

The airline said it carried 81.7 million passengers during the 12 months to the end of March and generated €5 billion in revenue - an increase of 3%.

Revenue per passenger was flat for the year, as strong ancillary revenue growth offset a 4% fall in average fares. Ryanair said its ancillary revenues grew by 17% - much faster than traffic growth - and now accounts for 25% of total revenues.

Chief executive Michael O'Leary described the performance as disappointing but said efforts since September to reinvent Ryanair's image and reputation helped passenger traffic rise 4% in the second half of the year.

It has also seen better booking trends and fuller planes in the current year.

Changes have included the relaxation of bag restrictions for passengers, a reduction in baggage charges and an easing of booking conditions. It has also moved to fully allocated seating on all flights. 

It said today that its new family product will launch next month which will allow children to receive discounts on allocated seats and bags, while frequent flyer families will also qualify for discounts on future fights. 

Ryanair is also planning to launch a business service in the Autumn, which will include same day flight changes, bigger bag allowance, premium seat allocation, and fast-track through security at many Ryanair flights.

The airline operates more than 1,600 routes from 68 bases. It recently opened four new bases in Athens, Brussels, Lisbon and Rome and said these are performing ahead of expectations. 

Ryanair said it would continue to invest in its web and digital improvements over the coming year, and it is set to deliver a new app by the middle of the summer. 

Ryanair eyes increased profits on higher fares, traffic

For the year ahead, Ryanair is predicting a significant increase in profit to a range of between €580m and €620m.

Ryanair said it will ground fewer aircraft during winter and it also expects average fares to rise by 2% driven by stronger demand. Its passenger numbers for the year are set to rise by over 4% to 84.6 million. 

The airline said its forward bookings for Summer are ahead of last year. It said this should continue to deliver 2% higher load factors.

But it remained cautious about guidance for the second half of the year, especially after last winter's weak price environment. 

Ryanair said its fuel costs - which includes de-icing - will be €70m lower than last year as it is 90% hedged. But it added that it expects de-icing costs to rise from last year's unusually mid winter. 

It said that excluding fuel, unit costs will rise by about 5% due to pay increases, primary airport charges, a €25m rise in advertising and marketing and ownership cost increases due to summer lease-ins and new aircraft delivers from September onwards. 

"We expect this combination of a strong H1, but a weaker H2 will generate a significant rise in after tax profits to a range of between €580m to €620m, although this guidance is heavily qualified by H2 yield outturn, over which we currently have zero visibility," Mr O'Leary concluded.  

Ratings agency Fitch followed Standard and Poor in awarding the airline a BBB+ rating last week, making it the highest rated airline in the world.  The move opens the door to Ryanair to raise money on the debt markets to help fund it new plane orders from Boeing.