Ryanair's shares fell by 3.6 per cent in Dublin yesterday in spite of the airline producing better-than-expected second quarter results and raising its net profit guidance for the year to the end of March by €30 million.

Market traders said concerns about lower average fares in the second half of its financial year and higher fuel costs weighed on the airline's share price.

Ryanair said its average fares, or yields, would be about 5 per cent lower in the second half of the year. Its average fare declined by 1 per cent in the first six months to €49 a ticket.

Each flight had an 86 per cent load factor, down one point on a year earlier.

"Our outlook for the remainder of the fiscal year remains cautious as we have very little visibility beyond the next two months," Ryanair chief executive Michael O'Leary said.

In a note to clients, Citi Investment Research in London said Ryanair's valuation was "starting to look stretched".

Results for the six months to the end of September showed that Ryanair increased its passenger numbers by 20 per cent year-on-year to 26.6 million. Its revenue rose by 24 per cent to €1.55 billion while its profit after tax was up 24 per cent to €408 million.

Its basic earnings per share rose by 25 per cent to 26.61 cent.

Ryanair's ancillary revenues - its turnover from non-ticket sales - rose sharply during the six month period from €164.3 million last year to €252.3 million in 2007, helped by the introduction of baggage charges.

Ryanair raised its net income guidance for the full year from €440 million to €470 million.

Michael Cawley, Ryanair's deputy chief executive, said the airline would carry about 50 million passengers this year and planned to double its passenger numbers and profits by 2012.

On fuel costs, Mr Cawley said the airline had hedged 90 per cent of its requirement at $65 until the end of March. It has also hedged 10 per cent of its requirement for the period October to December 2008 at the same price.

Mr Cawley said the airline was working with Dell on launching a new online reservations system in January.

He said 25 aircraft would be fitted with equipment to allow the use of mobile phones on flights by the end of next March, and on all aircraft by the end of 2008.

Mr Cawley said the airline was in discussion with 15 airports about launching new bases, including Oporto, Riga, Oslo and Paris Beauvais. "We expect to add some of those bases over the next three or four years," he said.

Mr Cawley said Ryanair was unlikely to add any new routes to its operations in Dublin and Cork, beyond what has already been announced.

Ryanair is Dublin airport's biggest user, putting about 9 million passengers through it annually and basing 22 planes there. "We've had a lot of growth in Dublin in the past couple of years but costs there have gone up."

Its shares closed in Dublin yesterday at €5.45, down 20.5 cent.