July 28 (Bloomberg) -- Ryanair Holdings Plc, Europe's biggest discount airline, said profit fell 85 percent, missing analysts' estimates, and may post its first full-year loss since going public in 1997 because of increased fuel expenses.

Ryanair dropped as much as 25 percent in Dublin trading after saying today first-quarter net income excluding writedowns fell to 21 million euros ($33 million) from 138.9 million euros a year earlier. Analysts had predicted profit of 50.9 million euros. Sales rose 12 percent to 777 million euros in the three months ended June 30, also missing estimates.

The carrier, struggling with record oil prices and a slowdown in consumer spending, expects an annual result of between breakeven and a loss of 60 million euros. Ryanair, which says its average fare is 42 euros, predicted ticket prices could fall as much as 5 percent in the year. Ryanair had previously said it would probably break even this fiscal year.

``They're certainly more negative on the outlook,'' said Neil Glynn, an analyst at NCB Stockbrokers in Dublin with a ``hold'' rating on the stock. ``The drop-off in yields is quite worrying. It might signal some weakness in last-minute bookings. It does suggest a lesser ability to pass on fuel costs to the passenger than the market would have anticipated.''

Ryanair, based in Dublin, fell 48 cents, or 15 percent, to 2.75 euros at 10:34 a.m. The earlier 25 percent drop was the most since January 2004. EasyJet Plc, Europe's second-biggest discount airline, fell 7.3 percent.

Plans to Ground Aircraft

Ryanair is planning to ground 19 planes at Dublin and London Stansted, its most expensive airports. The carrier also will take delivery of about 32 new aircraft between September and April, boosting its fleet to 195 Boeing Co. planes.

``The emerging economic recession in the U.K. and Ireland caused by the global credit crisis and high oil prices means that consumer confidence is plummeting, and we believe this will have an adverse impact on fares for the rest of the year,'' Ryanair Chief Executive Officer Michael O'Leary said in the statement today.

Record oil prices have made jet fuel the airline industry's single biggest expense and pushed at least 24 carriers to cease flying or file for bankruptcy this year.

Ryanair is trimming costs by freezing pay for senior management this year and closing its Dublin call center. Unit costs excluding fuel fell 6 percent in the quarter. Fuel costs almost doubled to 367 million euros to represent 50 percent of the airline's total costs, compared with 36 percent last year.

`Now Unrealistic'

``If this airline is going to survive and prosper, it's got to double its fares, its got to do what other airlines are doing and cut capacity,'' said Howard Wheeldon, senior strategist at BGC Partners in London.

British Airways Plc, Europe's third-biggest airline, has said breaking even this fiscal year would be a ``considerable achievement'' amid record oil prices. EasyJet said last week fiscal-year pretax profit may fall as much as 46 percent because of higher fuel expenses.

``We now think that consumer confidence has started to weaken,'' Ryanair Chief Financial Officer Howard Millar said in an interview. ``The airlines now are unrealistic if they predict fares or fuel surcharges to increase.''

Oil Hedge

Ryanair, which was largely unhedged for the first quarter, has now hedged 90 percent of its fuel needs for September at $129 a barrel and 80 percent for the third quarter at $124 a barrel. O'Leary said in May that he wouldn't hedge until oil prices fell below $100 a barrel.

First-quarter yields fell 8 percent compared with a year ago because of the absence of the Easter holiday, the airline said today. Easter Sunday, the timing of which varies from year to year, was in April in 2007 and March this year.

Ryanair, based on the low-cost model pioneered by Southwest Airlines Co. in the U.S., started flying in 1985 with a 15-seat airplane. The carrier now has about 163 aircraft and the highest operating profit margin among European carriers.

Ryanair's adjusted first-quarter earnings exclude a 17.9 million-euro writedown on 15 aircraft and a 93.6 million-euro writedown on a stake in Aer Lingus Group Plc, Ireland's second- biggest carrier. Ryanair has to write down the stake if its market value falls for three quarters.

To contact the reporter on this story: Tracy Alloway in London at talloway@bloomberg.net

Last Updated: July 28, 2008 05:43 EDT