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. Last Updated: 07/27/2016

Ryanair Embarks on A Market Revolution

DUBLIN, Ireland -- Ryanair rocked the European no-frills airline sector Tuesday as it announced a 59 percent rise in full-year profits but said margins would fall as it prepares to cut fares in an aggressive new growth campaign.

"Our aim is not to kill anyone [of our competitors] but it is to grow aggressively. We're going to destroy the airline business as we know it," CEO Michael O'Leary said.

Nevertheless Ryanair intended to recover its position this year as Europe's biggest low-cost carrier, he said, having been overtaken last year by easyJet's acquisition of smaller rival Go Fly.

"They're not businesses that compete head to head ... but it's probably a reflection of what might happen to the pricing environment in short haul in Europe more generally," Merrill Lynch analyst Anthony Bor said.

O'Leary also dismissed the falling share price as a short-term phenomenon. "Shareholders out there who want to see big increases over the short term, goodbye, godspeed," he told a news conference in London.

The efficiencies of the young low-cost airlines like Ryanair and easyJet are the envy of traditional airlines saddled with old-fashioned cost structures and suffering from poor demand for full-service air travel due to weak economies and the impact of the SARS virus.

In contrast Ryanair said its margins rose last year to 28 percent, up four percentage points, in one of the worst years ever for mainline carriers.

The airline said net profits for the year to March 31 rose to 239.4 million euros, while traffic grew 42 percent to 15.74 million passengers and average fares dropped 6 percent.

The company also said it has $1 billion cash on hand, to use as a war chest in a new battle for growth in traffic.

"We're going to force everybody down for the rest of the year, but we're going to do it from a position of strength," O'Leary said.

But O'Leary, vowing to grow passenger numbers by 50 percent this year, said further fare cuts and the strong euro would hurt the airline's own average fare yields and margins.

"Shareholders should be aware that these results for the past 12 months have been exceptional," O'Leary said. "We have repeatedly stated that profit margins of almost 30 percent are a one-off and nonsustainable."

He said the company hoped to realistically grow traffic at about 25 percent annually and to maintain profit margins, after taxes, at about 20 percent.

Analysts said they had expected the company to announce some erosion in yields for the year ahead, but also said Ryanair typically has been cautious in its predictions.

"In the short term the note is cautious but it's a super company and the long-term business model is very much intact," said analyst John Mattimoe at Merrion Capital in Dublin.

O'Leary said he was confident of carrying more than 30 million international scheduled passengers within three years, at which point Ryanair would overtake full-service airlines Lufthansa and British Airways as the biggest international carrier in Europe.

Ryanair is already the world's No. 3 passenger airline by share value with a market capitalization of some $5 billion.