RYANAIR’S PROFITS after tax fell by 23.8 per cent in the three months to the end of June as the effects of the volcanic ash crisis hit its bottom line.

The Michael O’Leary-led carrier took an exceptional charge of €50 million in the first quarter of its financial year relating to the cancellation of 9,400 flights in April and May because of the volcanic ash from Iceland.

This left Ryanair with an after-tax profit of €93.7 million compared with €123 million in the same quarter of 2009.

When exceptional items are stripped out – the volcanic ash charge was offset somewhat by a €5.2 million tax gain – Ryanair’s after-tax profit rose by 1 per cent to €138.5 million.

Speaking to The Irish Times yesterday, deputy chief executive Michael Cawley said the volcanic ash disruption had two negative effects on Ryanair’s business.

“There’s the cost of compensation and the significant reduction in fares that we had to introduce in late May and June to get people flying again,” he explained. “People were genuinely nervous that they’d be stranded somewhere and we had to use low fares to account for that.”

Mr Cawley said Ryanair was now “seeing a return to normal booking patterns”.

In spite of the profit hit, Ryanair reported a 16 per cent rise in revenue to €896.8 million. Passenger numbers increased by 8 per cent to 16.6 million.

Costs rose by just 1 per cent in the quarter, although its fuel bill increased by 34 per cent to €287 million as oil prices ticked up. Mr Cawley said Ryanair’s fuel bill for this year would probably be about $300 million higher “just buying the same level of fuel”.

The airline said it “remains cautious” about the outlook for the rest of the year. It expects passenger numbers to rise by 11 per cent to 73.5 million and has left its profit guidance unchanged at “between approximately €350-375 million”.

Joe Gill, an aviation analyst with Bloxham Stockbrokers, described Ryanair’s profit guidance as “conservative”. He expects the airline’s net profit to “exceed” €390 million.

But Mr Cawley said Ryanair has “no more visibility now” on profits than when it released the guidance recently. “We’re hesitant about being too optimistic at the moment,” he added.

Ryanair said the yield increase – average fare achieved – for the year would be 5-10 per cent. Average fares rose by 5 per cent in the quarter just passed.

Mr Cawley said the fares increase was due to reduced capacity from Ireland and the UK, longer flights to destinations such as Greece and the Canary Islands, and a “better balance between supply and demand”.

Ryanair has significantly reduced its services from Ireland to the UK, with the number of daily flights from Dublin to London falling from 22 to 14.

Mr Cawley blamed this on air travel taxes and increased airport charges. “All that’s happening is that we’re generating tax for the Government with less capacity.”

Mr Cawley rejected the suggestion that Ryanair’s cuts from Ireland were driven by the recession and a falloff in consumer demand.

“There’s no validity to that,” he said. “By the end of next week, we’ll have 35 new aircraft placed elsewhere across Europe. There’s loads of demand if the price is right.” He said Ryanair would shortly open new bases in Barcelona and Valencia in Spain, which is also in recession but has cut taxes and charges to stimulate growth. Mr Cawley said he is also due to meet with Greece’s minister for tourism in September to discuss growth opportunities.

“They’re welcoming us with open arms . . . they want to grow their tourism and they’re right.”