Ryanair kept its guidance for full-year profits today, but said falls in average fares in the second half would be at the worse end of its 10-20 percent forecast range.
"Yield (average fare) declines in H1 now look like they are at the lower end of our 5-10 percent range, but we are still very cautious on the second half," chief executive Mr Michael O'Leary told a transport conference in London.
The firm said it continued to expect a 20-per cent rise in full-year profits after tax.
Airlines around the world are recovering from a prolonged economic downturn exacerbated by the war on Iraq and outbreak of the deadly SARS virus last year. But soaring oil prices and a price war on short-haul routes are holding back profits.
Mr O'Leary said he expected conditions to remain tough.
"It is going to be awful out there. There are going to be continuing fare wars in 2005," he told the conference.
However, he expected fuel prices would go down, with oil returning to about $30 a barrel by next summer.
He also told reporters that Ryanair had no short term plans to change its hedging strategy, despite a recent decline in fuel prices.
"Fuel has improved a little bit. But it is fluctuating around so wildly there is no point in worrying about it," he said.
Ryanair's exposure to oil is currently hedged at $26 a barrel until the end of October. The firm has said previously it will not resume hedging until oil returns to about $30 a barrel.
Earlier Ryanair shares in Dublin were up 0.7 per cent at €4.26 euros.
Meanwhile a Belgian minister has called on Ryanair to repay part of incentives related to its operations at Charleroi airport.
The minister in charge of airports for the Walloon region, Mr Andre Antoine, said he would write to the airline's management to remind them of their obligations.
On Thursday, Ryanair said it would dismiss any request to repay aid it received for using Charleroi airport.
The company was responding to reports from Belgium that a letter requesting repayment of €4 million would be sent to the airline "immediately".
The European Commission last February ordered the airline to repay "illegal subsidies" agreed with the Walloon government under a 15-year deal for operations at Charleroi signed in 2001.
Ryanair immediately announced its intention to appeal what it called a "flawed decision" to the European Court of Justice.