Europe's biggest low-cost airline Ryanair disappointed investors with a 25-per-cent increase in second-quarter net profit overshadowing an expected upgrade to full-year earnings to 380 million to 400 million euros.
Shares in the Irish airline dropped more than four per cent in early trade after a hefty fuel bill dashed expectations for a 40 per cent increase in quarterly profits, and an increase in full-year guidance failed to compensate.
Second-quarter net profit was 313 million euros ($437.3-million U.S.), Ryanair said on Monday. The average forecast of six analysts polled by Reuters was for quarterly net profit of 349 million euros.
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Ryanair's fuel bill rose 44 per cent in the first half to 660 million euros, due to higher prices and increased activity.
"There's a little bit of disappointment, most people were (expecting) around 350 (million euros) for second-quarter net profit and they came in a bit behind that," said Ken Darmondy, analyst with Goodbody Stockbrokers.
"Other people might be a little bit disappointed that the upgrade that came wasn't bigger because all the airlines across Europe have had upgrades in the last two weeks."
By 0948 GMT, its stock was 3.0 per cent lower at 4 euros, underperforming a flat general index.
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Ryanair said it expected full-year net earnings to rise about 8 per cent from a previous guidance of 350 million to 375 million euros as yields improve on the back of rising fares.
The rosier outlook follows raised earnings expectations across the sector with leading flag carriers Lufthansa and Air France-KLM last week citing improving revenues and robust bookings.
Ryanair also said it had no plans to make a third offer for rival carrier Aer Lingus unless the government, which owns a 25-per-cent stake in Aer Lingus, offers to sell its shares.
Ryanair has exploited the recession to expand at the expense of higher-cost rivals in Europe, and the group said consumers would continue to trade down.
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"We continue to gain market share across Europe," Chief Executive Michael O'Leary said in a statement. "We expect this trend to continue."
The airline cut its estimate of the costs of refunding tickets on flights cancelled as a result of the volcanic ash cloud earlier this year to 32 million euros from 50 million euros.
Most of Ryanair's growth comes from the continent and it is reducing capacity in recession-weary Ireland, blaming a tourist tax introduced last year as part of government austerity measures.
"We have again cut our Dublin winter capacity by 15 percent and have switched more aircraft to other European countries which have scrapped tourist taxes and cut airport charges," O'Leary said.