No-frills airline Ryanair today provided further evidence of the cut-throat conditions in the low fares market by reporting a 6% fall in income per passenger despite record profits.

The Dublin-based carrier blamed price-cutting to counter the challenge from rivals for the drop in passenger yield, which was at the lower end of an expected 5%-10% range.

The airline said it expected a similar decline in the second quarter, although yields could drop by up to 20% next winter "as chronically loss-making competitors continue to dump prices".

However, Ryanair said passenger volumes in the quarter grew by a record 28% to 6.6 million and quarterly post-tax profits climbed to an all-time high of 53.1 million euros (£35 million).

The airline said it hoped to be able to offset the impact of higher fuel prices by making cost savings in other areas, although it did not give details.

Unit costs fell by 4% during the quarter as more of the airline's new larger Boeing 737-800 jets entered service.

Chief executive Michael O'Leary insisted that other higher cost airlines and loss-making low cost carriers were unable to compete with Ryanair's "low fares, low cost base".

But he added: "We continue to be cautious in our outlook for the remainder of the year."

Shares in the airline today lost 3% or 0.15 euro cents to 4.25 euros.

Tuesday August 03, 2004