Ryanair's inexorable passenger growth will go into reverse this winter for the first since it became a low-cost carrier,

Ryanair's inexorable passenger growth will go into reverse this winter for the first since it became a low-cost carrier, the airline admitted on Monday, as high fuel costs and weak demand force the grounding of up to 80 aircraft.

Europe's largest short-haul carrier said passenger numbers will fall between September and March compared with the same period in 2010/11, ending a trend that has seen traffic figures at the Dublin-based airline grow by millions of people every six months. During last winter Ryanair carried 32 million passengers out of an annual total of 72.1 million people. Michael O'Leary, Ryanair chief executive, rejected suggestions that grounding nearly three-out-of-10 jets in its fleet indicated a saturated budget airline market.

"Why is the model not broken? Because next March we will fly all those aircraft," he said. The Ryanair boss said it made no economic sense to expand an airline when, according to forecasts, the traditionally quiet winter months will be accompanied by an average fuel price of around $110 (£68) per barrel.

"If you are facing oil at $110 per barrel this winter it is not a time when you want to be opening new routes and bases," he said.

O'Leary added that after Ryanair completes a Boeing order by taking the last of its new Boeing 737-800 aircraft in 2013, it will not be taking on new aircraft until 2016 at the earliest. Asked if Ryanair is becoming a slower-growing airline that generates its profits from raising fares rather than aggressive expansion, he said: "That's the likelihood." Despite this, Ryanair still grows faster than most and last year added 328 new routes to its 1,000-strong route network. O'Leary warned last year that the airline's "pile it high and sell it cheap" approach will have to change because slower growth rates will have to be balanced with higher fare revenue, forcing Ryanair to become a more sophisticated operation. The airline has already launched reserved seating trials on some routes.

Passengers will feel the squeeze immediately. O'Leary said that high fuel prices will push up Ryanair's average fare by 12% to more than €43 (£37) this year, as the airline seeks to recover an increase in fuel costs by €350m. "A 12% growth in average fares will only just cover the €350m additional fuel bill," he said.

O'Leary said Ryanair's average "lead-in" fare, the term for the lowest ticket price on a flight, will be €12 this summer compared with up to €9 last year. Fewer of those tickets will be offered too, he added.

O'Leary spoke as Ryanair announced a pre-tax profit of €401m for the year to 31 March, up 26% on last year once an exceptional charge related to last year's Icelandic volcano eruption is stripped out. Revenues rose 21% to €3.6bn.

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