Ryanair says it will cut fares by up to 12% as profits surge despite terror attack fears among travellers

Ryanair plans to cut passenger air fares by up to 12 per cent this year by passing on lower fuel costs to customers, as the airline industry suffers from terror fears.

The Dublin-based budget airline enjoyed a 43 per cent rise in annual profits to €1,242 (£959million) and saw passenger numbers swell by 18 per cent to 106.4millon.

Ryanair said today that it expected fares to fall by an average of 7 per cent in this financial year - to March 2017 - with 5 to 7 per cent cuts over summer and as much as 12 per cent in winter.  

Cutting fares: Ryanair plans to cut air fares for passengers by around 7 per cent this year

In a bid to shed its reputation for poor customer service and garish yellow plane interiors, the airline is in the midst of its 'Always Getting Better' scheme and while it says it remains 'obsessive' about unit costs, it has been winning customers by steadily improving its service.

The airline said it has improved its in-flight experience by giving people more leg-room, introducing 'slim line' seats and replacing garish yellow seats with softer blue hues.

Ryanair said today that it expected fares to fall by an average of 7 per cent in this financial year - to March 2017 - with 5 to 7 per cent cuts over summer and as much as 12 per cent in winter. 

On the issue of the EU Referendum on 23 June, Ryanair said it is 'actively' campaigning in favour of the Remain vote.

The airline said: ' If the UK leaves the EU then this, we believe, will damage economic growth and consumer confidence in the UK for the next 2 to 3 years as they begin to negotiate their exit from the EU and re-entry to the single market in very uncertain market conditions.'

Ryanair said it plans to cut fares over the next year in a bid to maintain its market share in an industry rocked by a string of terrorist attacks.

Analysts suggest Ryanair's plans to cut fares could spark an all-out price war among budget airlines. Robin Byde of Cantor Fitzgerald said: 'Ryanair is a major player in many of the markets and airports it flies to. If it cuts prices, other airlines will have to respond to that.'

Meanwhile, Russ Mould, of AJ Bell, said: 'Ryanair has thrown down the gauntlet to its budget airline rivals promising further cuts in air fares as it bids to maintain its market share.'

In charge: Ryanair boss Michael O'Leary has come out in favour of the 'Remain' campaign in the EU vote

Earlier this month, rival easyJet also said it will look at price cuts, saying it 'will be able to offer its customers even better value fares this summer.'

But, in April, easyJet swung to a half-year loss, claiming recent terror attacks caused a drop in passenger numbers. 

Today, easyJet told This is Money: 'easyJet consumers have enjoyed lower fares, which have decreased by 6% year-on-year, the second successive year of falling fares, as the benefits of lower fuel costs are passed on to passengers.

'easyJet will offer its customers lower value fares this summer - with fares down around 7% in the period April to June.'

Ryanair said its fourth quarter sales had been 'adversely impacted' by over 500 flight cancellations after the terrorist attacks in Brussels. 

Changes: Ryanair is in the process of carrying out its 'Always Getting Better' scheme

Over the past year, Ryanair said it had cut fares by 1 per cent to around £36.11, having passed on fuel savings to customers.

The cost of fuel has plummeted by around 70 per cent since the summer of 2014.

Ryanair's full-year revenues grew by 16 per cent to €6.5billion. Looking ahead, the airline said it 'cautiously' forecasts net profits this year of between £1.07billion and £1.10billion, an increase of around 13 per cent. 

Michael O’Leary, the boss of Ryanair, said: 'FY16 was a year in which we delivered significant traffic and profit growth in all four quarters (despite an ave. oil price of $90bbl as a consequence of hedges put in place in 2014) as our AGB service programme is attracting millions of new customers to our lowest fare/lowest cost model.'

Commenting on the results, analysts at Liberum said: 'The results for the year to March were in line with consensus and our estimates. 

'Compared with our forecasts, revenue was slightly light but costs marginally better than forecast.'

The group's shares are up 0.30 per cent or 0.04p to 13.41p this morning. 

Fare war: Today, easyJet told This is Money, 'easyJet will offer its customers lower value fares this summer - with fares down around 7% in the period April to June'