Ryanair today reported its weakest annual profit in four years and said earnings could fall further as European airlines wage what chief executive Michael O'Leary described as "attritional fare wars." 

After initially falling 6%, the shares made up some ground after Michael O'Leary said that lower fares and profitability for a couple of years were a price worth paying to boost market share and hasten consolidation.

Shares in Ryanair closed 4.6% lower to €10.30.

Mr O'Leary said the lower fares and profit were cyclical and that four or five European airlines were likely to emerge as the winners in the sector. 

"Our strategy would be to keep adding capacity as quickly as we can in all the markets where we can," Michael O'Leary, who has been in charge of Ryanair since 1994, said. 

"Will it be painful for a year or two, yes it will. But will it shake out more of the competition, yes it will," he stated. 

Ryanair, Europe's largest low-cost operator, had already signalled a sharp fall in profitability due largely to overcapacity in two warnings last year. 

Its 29% fall in after-tax profits to €1.02 billion for its financial year to March 31 was in line with investor forecasts. 

Revenues for the year were up by 6% to €7.56 billion, while the airline saw traffic growth of 7% and a decline in fares of 6% in the year to March 31. 

But its profit forecast for the current financial year to end-March 2020 of between €750-950m, was "considerably worse than expected," Goodbody analyst Mark Simpson said. 

A company poll of analysts published ahead of the release had forecast a figure of €977m. 

CEO Michael O'Leary said the forecast was effectively for profits to remain flat as the 2020 figure includes recently acquired and loss-making Laudamotion unit for the first time and would be a "very good outcome." 

The equivalent figure in 2019 would have been €880m.

Ryanair said it expected summer fares to be lower than last year although they could improve in the winter to leave fares for the full year to March 2020 between 2% lower and 1% higher than last year.

Several rival airlines have warned of a worse trading environment - partly due to overcapacity and partly because European travellers are holding off booking their summer holidays for fear of how the Brexit process will pan out. 

Ryanair has also been affected by delays in the delivery of the Boeing 737 MAX after its worldwide grounding in March following a fatal Ethiopian Airlines crash. 

The airline, which has ordered 135 737 MAX 200s and has options on 75 more, was expecting to receive its first five planes between April and June but said it now expects them to be flying by November. 

Michael O'Leary said he was "reasonably confident" it would have around 50 MAX aircraft flying next summer. 

"We continue to have utmost confidence in these aircraft which have 4% more seats, are 16% more fuel efficient and generate 40% lower noise emissions," Ryanair said. 

Two Boeing 737-Max aircraft crashes - one in Ethiopia in March and another in Indonesia in October - killed 346 people, leading to the aircraft being temporarily grounded. 

The grounding has forced Ryanair to cut around 1 million seats in the year to March 2020. But it still expects to fly 153 million passengers in the period, up from 139 million last year.  

The airline also plans to have a conversation with Boeing about "modest compensation", Ryanair's chief financial officer Neil Sorohan said. 

Ryanair's shares were trading lower this afternoon and are down over 40% from a peak of €19.39 in August 2017, before the airline was hit by a wave of industrial unrest, fare weakness and the grounding of the MAX. 

In what Michael O'Leary described as a vote of confidence from the board, Ryanair will begin a €700m share buyback in the coming days. 

Shares in the airline fell in Dublin trade today.