Ryanair remains unhedged for its fuel needs beyond the end of this year and believes oil prices will resume their recent downward path after a record one-day rise yesterday.
"We're heading into recession and people are becoming much more price sensitive. Our experience of recession is that fares generally fall," Chief Financial Officer Howard Millar told reporters at a news conference in London today.
"We are already seeing signs of this ourselves despite a reduction in capacity. People are more price sensitive and carriers will struggle to fill their seats unless they reduce fares."
Mr Millar said the budget airline planned to ground 14 aircraft at London's Stansted airport this winter as it grapples with fuel costs and weakening consumer demand.
Last year it mothballed seven aircraft based at the airport during the quieter winter months.
Ryanair, which warned in July that stubbornly high fuel costs and lower ticket prices meant it could make its first loss since 1989 this year, still expected average fares to fall about 5 per cent this year, Millar said.
The airline last week tweaked its guidance, saying it would break even this year if oil stayed at $100 a barrel and return to "substantial profitability" in 2009.
Shares in Ryanair were 5.1 per cent lower at €2.42 in Dublin by 1218 GMT after the oil price surged to over $120 a barrel on Monday before dropping back below $110.
Mr Millar repeated Ryanair's view that more of its rivals would go bust during the winter but said his company was on track to meet its target of growing passenger numbers in the year to the end of March by 14 per cent to 58 million, and he expected the number of passengers Ryanair carries to grow 15 to 18 per cent next year to between 65 and 68 million.
That would be backed up by what Millar described as a "significant" route launch programme in the spring.
Net of any aircraft disposals Mr Millar said Ryanair would take delivery of 122 new aircraft between now and 2012, adding to its existing fleet of 166 Boeing 737-800 aircraft.
Ryanair is talking to Boeing and Airbus about "very significant" aircraft orders beyond 2012, he said.
Despite the current downturn Millar expects that by then the airline will be carrying 80 million passengers a year and have annual profits of about €800 million.
Mr Millar also said Ryanair expects an appeal against the EU's decision to block its proposed takeover of fellow Irish airline Aer Lingus to take place early next year.
"We would hope that sometime after that, we would be able to continue with our bid," Mr Millar said. "It's closer to happening than it was last year."
Reuters