Good Profits This Year, Trouble On The Horizon

What's this? A low-cost carrier predicting storm clouds ahead?

Ireland's Ryanair says, while 2003 was a very good year, 2005 will see a drop in the airline's growth rate. Between March 2003 and March 2004, Ryanair grew at a jaw-dropping rate of 47-percent. But during the next 12 months, CEO Michael O'Leary predicts growth will fall to just 25-percent.

Mind you, that's GROWTH. A lot of US legacy carriers might be looking at even the lower number with awe and envy.

In the wake of 9/11 and SARS, Ryanair, like Southwest and JetBlue, continued to grow while most full-fare carriers suffered losses and some even went bankrupt. Ryanair's profits were down a little (five percent) from the year before. That beat expectations in both London and New York.

Ryanair stock lost about a third of its price at the end of January when the airline issued its first-ever profit warning. Those warnings continued this week when the company announced it would probably cut fares 20-percent in light of fierce competition.

"Our outlook for the next 12 months remains very conservative," said O'Leary. As for skyrocketing fuel prices, O'Leary said his company has successfully hedged for the rest of the year and will "not be damaged or slowed by higher oil prices."

FMI: www.ryanair.com