BUDGET airline Ryanair has reported record profits as fare rises helped to offset a sharp rise in fuel costs.

Net profit for the year to March was £406m, up 25 per cent on a year earlier. Revenue rose by 19 per cent. The airline said traffic grew by 5 per cent while fares rose by 16 per cent on average, which helped to overcome a 30 per cent rise in fuel costs.

However, it warned profits in the current financial year could be lower.

"Recession, austerity, currency concerns and lower fares at new and growing bases in Hungary, Poland, provincial UK and Spain will make it difficult to repeat this year's record results," the company said in a statement.

However, Ryanair chief executive Michael O'Leary said that his airline could benefit from the economic gloom.

"People don't stop going on holiday. They just switch to lower cost carriers," he said.

He also rejected claims that Ryanair was not upfront enough in its charging structure.

He said charges for checking in bags were intended to change customer behaviour and make flying quicker for everyone.