Ryanair is to pay a dividend to shareholders for the first time since it floated on the stock market in 1997.

The company says it plans to distribute €500m to shareholders.

The airline also reported a more than 200% increase in after tax profits for last year, to €319m, for its financial year to the end of March, which was ahead of analyst expectations.

The airline made a pre-tax profit of €341m compared to a loss of €180m last year.

The massive jump in profits came on a revenue increase of just 2% to just under €3bn.

The airline also said it expected air fares to increase by between 5% and 10% this year, after a fall of 13% last year.

During its financial year, Ryanair carried 66.5m passengers, up 14% on its previous year.

Explaining the figures, the airline said that while ticket prices had fallen 13%, its costs fell by almost one fifth because of lower fuel and tighter cost control.

Ryanair said it was proud to have delivered such a huge growth in profits during a global recession and while many of its competitors were announcing losses or going bust.

The airline said traffic had fallen at many European airports because of the recession and it was being 'inundated with offers from large and small airports competing with lower costs and efficient facilities to win Ryanair's growth'.

With the exception of Dublin and Standsted, Ryanair said the costs of using airports had fallen giving an average airport and handling cost reduction of 9%.

The volcanic ash cloud from Iceland led to the cancellation of 9,400 Ryanair flights and the loss of up to 1.5m passengers up to 18 May.

Ryanair said in the 18 days from the middle of April there were 'repeated, unnecessary, closures of large swathes of European airspace'.

It said the full cost of the cancellations would not be known for some time as it was expecting compensation claims under what the airline said were 'disproportionate and discriminatory' EU regulations.

Ryanair said it did not believe that the airline should be exposed to such unlimited liability.

It pointed out that EU 261 legislation does not cap the quantum or the period air passengers can claim for.

The airline said it had ended discussions on an aircraft order with Boeing and arising from that would generate surplus cash up to the end of its 2013 financial year.

Ryanair said that facilitated a once off dividend in October, subject to shareholder approval, worth €500m.

It said a further dividend may be paid before the end of its 2013 financial year.

Ryanair said it expected to grow traffic by 11% this year, the volcano permitting, but fuel costs would increase by €300m.

It said airfares would rise by between 5% and 10% this year.

All going well, it said that profits this year would rise by between 10% and 15% to a range of between €350m and €375m.