Ryanair, announcing 21 per cent rise in profits, has revealed a refusal to renew a hedge against rising fuel costs, predicting a weakening in the oil market.

The airline said that while it was "almost fully" protected until the end of September against the increase in fuel bills which has prompted many airlines, such as British Airways, to introduce ticket levies, it was prepared to pay market rates from October.

Michael O'Leary, the Ryanair chief executive, said: "We believe that over the medium term, [fuel] prices will fall and therefore it would be unwise to lock-in at the current high rates."

The market would weaken as Russia and Iraq pumped more oil to earn hard currency, he added.

“Will there be opportunities to buy forward between now and November at less than $40 a barrel? I think yes is the answer,” he said.

His forecast came as crude prices set record highs, with the price of benchmark US crude rising by $0.42 a barrel to $44.24 a barrel, the highest price in the 21 years in which the oil market has run in its current format. The price of Brent crude rose by $0.28 a barrel to a 14-year high of $40.36 a barrel.

Mr O'Leary said that the airline would be able through cost savings in "other areas" be able to offset its high fuel bills.

Ryanair said that it had in the April to June period raised profits to €53.1 million on revenues up 23 per cent at €302.8 million. While passenger numbers rose by 28 per cent to 6.6 million, the impact of the increase was in part offset by a 6 per cent fall in yields.

Mr O'Leary restated forecasts of widespread collapses of airlines as tough competition forced further fare cuts.

"Next winter, we expect the yield decline to be in the minus 10 per cent to minus 20 per cent range as chronically loss-making competitors will continue to dump prices, resulting in even more airline casualties," he said.

Ryanair shares stood €0.08 lower at €4.32 in afternoon trade.

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