{mosimage}No-frills airline, Ryanair's call for a reduction in airport charges at Stansted Airport has fallen on deaf ears, with a Competition Commission report published today recommending an increase over the next five years.

The CC is recommending an increase in the maximum level of airport charges at Stansted to £6.26, compared with the current level of £6.05 per passenger.

Ryanaiar has been unequivocal in its demands for a reduction in landing charges at Stansted, nowhere more clearly than in its call in the half-year results it published yesterday: “for the removal of Mr Harry Bush, the hopeless CAA regulator, as well as the sale of Stansted by the BAA monopoly.”

Ryanair chief executive, Michael O'Leary said: “Mr Bush has rubber stamped almost all of the BAA’s cost increases and capex proposals including their crazy plan to waste £4bn on Terminal 2 despite the unanimous opposition of all Stansted airline users to this gold plated Taj Mahal.”

While the CC fought short of the £6.38 per passenger - with an annual increase of 7.1 per cent above the retail price index - proposed by BAA, the price increase will nevertheless enrage Ryanair. The CC has allowed an increase of no more than 1.75 per cent above the RPI over the next five years.

Ryanair will however find some solace in the finding that “Stansted Airport had acted against the public interest in the period since the last reference to the CC by failing to consult adequately with airlines on the development of the airport and its capital expenditure plans; by failing to manage as effectively as possible the security queuing process; and by
failing to offer appropriate landing charges for larger cargo aircraft.”

As a result, the Commission is recommending that BAA improves the consultation process and introduces a service quality rebate scheme which will impose financial penalties on BAA if it fails to meet agreed standards. Stansted will also be required to offer off-peak discounts on landing charges for the largest cargo aircraft.

With regard to the proposed new runway and terminal at Stansted, the Competition Commission ruled that given the uncertainity surrounding the timings and costings of the project over the five year period under review,  construction costs are not yet built into the price caps.

If Stansted receives planning approval during the period, it has been given permission to ask for the price caps to be re-set in line with the increased capital expenditure.

Famed for its bullish outlook, Ryanair broke new ground yesterday by talking up its prospects in the same breath as announcing a 77 per cent reduction in profits.

The 'perfect storm' predicted by Ryanair chief executive, Michael O'Leary in February has come to pass  - putting a large dent in Ryanair's profits in the process. But the turbulent climate presents unique growth opportunities for the Irish carrier, according to O'Leary.

“We expect continuing bankruptcies and consolidations to create even more opportunities for Ryanair to grow. If oil prices remain at approx. $80 pbl next year then our earnings will rebound strongly,” he said.

“With one of the strongest balance sheets in the airline industry, €2.1bn in cash and the lowest cost base, Ryanair is strongly positioned to take advantage of the opportunities that will inevitably arise from the financial crisis and economic recession over the coming year.”

Even without exceptional items totalling a eye-watering €119.2m (£94m) - comprising a €96.3m (£76m) impairment of the stake Ryanair has been building in Aer Lingus and a €25.7m (£20.3m) depreciation charge on aircraft it plans to sell - profit after tax decreased by 47 per cent to €214.6m (£190.5m), compared to €407.6 (£321.4m) in the half year ended September 30, 2007.

Ryanair's profits have been squeezed by the dual pressures of a 101 per cent increase in fuel prices compared to last year and the need to reduce fares to keep its planes full.

Total operating revenues increased by 16 per cent to €1,810.6m, slower than the 19 per cent growth in passenger volumes, as average fares declined by 4 per cent.

In common with a number in the airline industry, Ryanair continues to face tricky decisions with regard to the price at which it hedges fuel.

Fuel prices remain volatile but are currently significantly lower then the $125 a barrel Ryanair paid in the first half of this year. While the company is 80 per cent hedged for Q3 at $124 pbl, it is totally unhedged in Q4. And it said it had taken advantage of recent falls in oil prices to hedge 25% of Q1 and Q2 of the next fiscal year's supply at an average of $77 pbl.

“We have a significant cost advantage over our competitors many of whom have hedged fuel next year at significantly higher levels than current market prices. This will force competitors to further increase airfares and widen the price gap between them and Ryanair’s lowest fares,” O'Leary said.

While he said the full year outlook was impaired by "limited visibility", O'Leary forecast a loss in the third and fourth quarters, with break even the likely outcome for the full year.

“Achieving a half year net profit of €215m in very difficult trading conditions with record oil prices is a testimony to the strength of the Ryanair lowest fare model, which delivered 19% traffic growth, and a 4% yield decline,” O'Leary said.