* Misses analysts forecasts on Q1 profit
* Revenue up 29 pct, but fuel price 50 pct higher
* Strong summer sales will enable it to hit year profit target (Adds details)
By Conor Humphries
DUBLIN, July 25 (Reuters) - Ryanair said higher summer sales would keep it on track to meet earnings targets this year after soaring fuel costs squeezed profit in the three months to June.
Europe’s largest low-cost airline carried 3 million more passengers from the quarter a year ago and earned more from baggage fees and sales of in-flight food and drink, boosting revenue by 29 percent.
But a 50 percent surge in fuel prices cost 140 million euros more than planned, pushing profit below market expectations. Its shares traded down 2 percent at 3.39 euros by 1113 GMT.
“It’s a solid performance, even if the costs may have surprised some,” said Brian Devine, an analyst at NCB stockbrokers.
“But there is no real catalyst for the share price. The market’s profit expectations for the year are well ahead of Ryanair’s and there is nothing here to change that,” he said.
The airline made a profit after tax of 139.3 million euros in the first quarter, up 1 percent on a year ago but below the 151 million in a Thomson Reuters poll of analysts.
It maintained its profit forecast for the year of 400 million euros, unchanged from the previous year , as it sees growth of 12 percent in fares and 4 percent in traffic balanced by a 13 percent rise in operating costs per passenger.
Analysts have been forecasting 447 million euros.
SEES ‘VERY STRONG’ Q2
Full-year profit will depend heavily on the second quarter as the company focuses more on summer sales and plans to trim capacity in the winter. It said a 10 percent growth in traffic in the first half would be followed by a 4 percent fall in the second.
“We are going to have a very strong Q2 and we are confident that despite high oil prices we can deliver net profit of 400 million euros,” Chief Financial Officer Howard Millar told Reuters in a telephone interview.
“Consumers are clearly spending money this summer but we will have to see what the winter brings,” he said.
Ticket prices were up 11 percent in the first quarter on traffic growth of 18 percent compared with the year-ago quarter, when a volcano in Iceland grounded 9,400 flights.
The airline hopes an optional 10 euro charge on some routes for extra leg room will boost income from ancillaries, which accounted for 21 percent of income in the first quarter.
Ryanair, which has lost tens of millions of euros in the past through poor fuel price hedging, said it was 90 percent hedged on fuel at around $86 a barrel for the year to March.
But the airline said it was disappointed by Boeing’s decision to scrap plans for an all-new 737 short-haul jet and instead upgrading its current design with new engines.
Ryanair exclusively flies 737s and has said it could be in the market for up to 300 aircraft for delivery by 2016.
“Our preference would have been for a redevelopment,” said Millar. “The key driver will be pricing and how much fuel it would save. It’s very early days, but clearly it’s something we have to look at.”
Ryanair, which last month signed a deal with the Commercial Aircraft Corporation of China to help it design a rival to the 737, said it would consider an alternative to Boeing if the current fleet economies could be maintained. (Editing by Greg Mahlich)