High oil prices and the weakening pound took their toll on budget airline RyanAir, which disappointed investors with a 27 percent fall in third-quarter net profit Monday. But results remained within the airline's own guidance.
Europe's biggest low-cost carrier said net profit in the three months to the end of December fell 27 percent to 35 million euros ($52 million) as winter fares fell almost 5 percent. That excludes a one-off gain from the sale of aircraft.
The result was below an average forecast of 41.8 million euros and in line with the lowest estimate in a Reuters poll of 10 analysts. Ryanair stuck to its full-year forecast for a 17.5 percent rise in the year to the end of March.
"I think it's in line with the guidance previously issued," CEO Michael O' Leary told "Squawk Box Europe".
"We're quite happy with the current year. I think into next year, we're into very choppy waters," O'Leary added.
The airline warned that there was a "significant chance" profits would fall in its 2008/2009 business year.
"The European airline sector is presently facing one of these cyclical downturns, with possibility of a "perfect storm" of higher oil prices, poor consumer demand, weaker sterling and higher costs," the airline said in a statement.
According to the most optimistic scenario, profit next year could grow 6 percent to 500 million euros if average ticket prices, or yields, stay flat and oil prices drop to $75 a barrel.
"But at our most conservative, if forward oil prices remain at $85, and consumer sentiment/sterling weakness leads to a 5 percent reduction in yields, then profits in the coming year could fall by as much as 50 percent to as low as 235 million euros (excluding profits from aircraft disposals)," it said.
The company also said it planned to spend up to 200 million euros buying back shares which, based on its current share price, would equate to 3 percent of Ryanair's share capital.
Bloxham analyst Ross McEvoy said shares in Ryanair looked set to fall despite some support from a new share buyback program and the airline's 2 billion-euro cash pile.
"There is no visibility, it's just guesswork what they are doing at this stage," McEvoy said of Ryanair's outlook.
Share Price Falls
Ryanair's stock has fallen 18 percent since the start of the year due to fears over the impact of rising energy costs and the company's limited fuel hedging for the year starting April 2008.
"We remain essentially unhedged for next year," Ryanair said on Monday.
The airline said it was in a better position than most competitors to cope with the tough market and it hoped to cut costs further as airports offer aggressive discounts due to falling demand.
"We see significant savings from airport costs," Chief Operating Officer Michael Cawley told Reuters in an interview.
Chief Executive Michael O'Leary is scheduled to hold a news conference in London on the company's results at 10:30 am London time.
On "Squawk Box Europe" O'Leary said that more competition was required for airport operator BAA.
"If there was competition between the London airports, there is no doubt in my mind they would all be adding runway capacity and you would have competition between them. What happens at the moment is because it's regulated, they are encouraged to waste enormous amounts of money," he said.
Shares of the airline closed 2.6 percent lower on London's FTSE-100 index.
-- Reuters contributed to this report