Ryanair is moving to fully-allocated seating on all flights from February 1.

Passengers who want to avoid paying a €5 fee to select their preferred seat will be allocated a seat 24 hours prior to departure.

The switch was announced as the no-frills carrier warned that annual profits will be below expectations.

Half year profits rose by just 1% to €602 million as traffic grew 2% to 49 million passengers.

Revenue per passenger increased 2% due to a 22% rise in ancillary revenues but costs rose by 3% largely due to a 7% increase in fuel prices.

Average fares fell by 2% during the half year, and have continued to fall this winter.

This will lead to a reduction in Ryanair’s full year profit guidance from €570 million to around €510 million, the airline said.

CEO Michael O’Leary said: “We are pleased to report slightly increased H1 profits, particularly against a backdrop of softer fares this summer.

“Yields in Q3 have softened, which is good news for our customers and has led to strong growth in traffic (up 6% in October) and load factors (up 1%).

“The 2% fall in fares was impacted by one off events such as the timing of Easter, the summer heatwave in northern Europe, French air traffic control strikes in June, and weaker sterling.

“Ryanair has responded to these market conditions by stimulating traffic growth with aggressive fare promotions.

“This will lay the foundation for traffic growth over the coming years, particularly as our new 175 aircraft deliver from September 2014.

“While fares are falling, ancillary revenues grew strongly by 22% to €713 million, driven by the successful roll out of reserved seating, priority boarding and higher credit/debit card fees.”

He added: “After 20 consecutive years of rapid growth, the next 12 months will see a brief pause in traffic growth, along with stable load factors.  We intend to use this period to further improve our industry leading customer service.”

Forward bookings are running slightly ahead of last year, but the softness in fares and yields continues.