Ryanair in deal to maintain engines

RYANAIR has announced a 10-year engine maintenance contract with General Electric Engine Services while the group announces second quarter results later today.

The deal carries a 10-year optional extension, Europe’s largest low-fares airline said, but it refused to give financial details.

In early May the company entered a joint venture with the Scottish Executive, Scottish Ayrshire and the Scottish Development International involving a £10m aircraft maintenance facility at Glasgow’s Prestwick airport.

That deal is not affected by yesterday’s announcement, a spokeswoman said.

“We have secured a long-term agreement which will enable us to significantly reduce our maintenance and overhaul costs,” Ryanair’s director of engineering, Michael Hickey said.

Ryanair Holdings is the biggest low-cost airline in Europe and will today report second quarter profits.

They are expected to rise by 8%, or about half the pace of sales growth, as high oil prices and stiff competition eat into returns.

In the current year the group has suffered a severe share price reversal as concerns about its ability to generate strong growth going forward emerged.

It followed a warning from the group, that spooked the markets, that earnings going forward would not be as strong as before.

Ryanair’s net income is expected to be around €140 million or better ($176m) in the period to September 30, 2004 against €128m a year earlier.

That is the mid point estimate from six analysts surveyed by Bloomberg News.

Sales could be up 14% to €400.3m, helped by the group’s expansion of in- flight services.

Recent, but unconfirmed reports, suggests the stiff competition and generally tough trading conditions has not been as bad as previously expected.

Shares in the group have risen modestly in the past week or so, but are well off their previous highs and unlikely to return to them for some time.

The Irish airlines shares slumped 38% this year well ahead of the Bloomberg Europe Airlines Index.

In Dublin the stock rose yesterday morning by as much as 1c to €4.10.

Airlines such as British Airways have seen their shares fall 7.4%, while

Luton, England-based low-fare competitor EasyJet Plc has lost 44%.

Of 20 analysts covering Ryanair, just six rate the shares a “buy”, 12 as a “hold”, and two as a “sell.”