Ryanair, the low-cost airline, escaped the effects of the terrorist attacks in London to report a 21 per cent increase in profits to a record £44.4 million (€64.6m) for the three months to the end of June.

Ryanair delivered its profits increase against a 35 per cent improvement in revenues to €404.6 million and a 30 per increase in passenger numbers to 8.5 million compared with 6.6 million during its first quarter last year.

Chief executive Michael O'Leary, who was quick to note a fall in passenger volumes in the days after the first terrorist attack in London claimed 52 lives, said: "Bookings were down for a number of days in the immediate aftermath of each of the two terrorist attacks in London on July 7 and July 21."

Mr O'Leary added: "If there are no further such attacks in London then we expect that our forward bookings will not be materially impacted. However, if there are further incidents in London, both bookings and yields could be adversely impacted."

Ryanair claimed that its commitment not to impose fuel surcharges on its customers helped both its increase in passengers and its 3 per cent increase in yields during the quarter.

Shares in Ryanair, which is listed in both Ireland and the UK, rose to 6.9p on the London Stock Exchange as dealers welcomed the profits increase.

But Mr O'Leary said his outlook for the remainder of the year was "cautious", particulary as a result of the current high cost of oil, which drove up the airline's fuel costs by 112 per cent to €109.9m during the quarter.

Ryanair has locked in its 90 per cent of its fuel costs for September at $57 a barrel. After that, it is hedged for the winter season at $49 a barrel. Mr O'Leary said the airline will "closely monitor" the future price of oil with a view to hedging its requirements for the summer next year.

Oil stuck to yesterday's highs this morning, with American stock trading above $61.5 a barrel following yesterday's death of the king of Saudi Arabia and renewed threats to supply.

Mr O'Leary added: "Our outlook for the remainder of the year is cautious as we continue to budget for higher oil prices but anticipate that these will be partly offset by a combination of other cost reductions and the current benign yield environment.

"Our competitors imposition of further fuel surcharges on their passengers and their removal of capacity from markets is positive for yields, and we still plan to grow traffic by approximately 27 per cent to 35 million passengers this year.

"However, further terrorist attacks in London could have a downward impact on passenger volumes and yields, although at this early stage we see no reason to revise our guidance."

As he hit out in characteristic style at the "third world facilities" suffered by passengers using Dublin airport, Mr O'Leary said Ryanair had begun legal action against the Irish government to try to force it to open up competition in the airport market.

Ryanair wants an independent competing terminal to be run by a competing operator.

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