Ryanair hiked its annual profit forecast almost 20 per cent yesterday on a surge in winter bookings and said it would slash fares by up to 10 per cent in the new year to steal more market share from struggling higher-cost rivals.

The improved guidance comes after Europe’s largest low-cost carrier introduced a series of customer service improvements and offered a new business fare with free checked-in baggage and the ability to make flight changes.

It now predicts profit after tax for the year to March at between €750 million and €770 million, up from a previous forecast of €620 million to €650 million and well ahead of an average forecast of €694 million in a company poll of analysts.

“We’ve had a bumper half year and we’ve had to boost our guidance as we got visibility on the second half of the year,” chief executive Michael O’Leary said in an interview.

“We are keeping prices low while improving the service. It’s as simple as that.”

Higher-cost rivals Lufthansa and Air France have both lowered their profit forecasts in recent days on higher competition and the cost of industrial action.

The sale of two million more tickets than planned over the winter will consolidate the Irish airline’s position as Europe’s largest airline by passenger numbers – boosting annual numbers to an estimated 89 million, up 8.5 per cent over the previous year.

We are keeping prices low while improving the service

“The market was looking for a revision, but this is pushing it to the upper end of expectations,” said Mark Simpson, an analyst with Irish brokerage Goodbody.

“They are using the strength of the first half to really grab market share in the second half.”

Ryanair plans to boost its market share by cutting fares by up to 5 per cent in the three months to December and by up to 10 per cent in the first three months of next year.

Profit after tax for the six months to September, the first half of Ryanair’s financial year, was €795 million, just below an average forecast of €799 million in a company poll.

Traffic grew 4 per cent in the first half and average fares were up 5 per cent.

The airline said it had attempted to lock in recent falls in the price of oil, hedging 90 per cent of its fuel needs for the year to March 2016 at around $93 per barrel and would try to extend that further in the coming months.

Before yesterday’s results, Ryanair’s share price was up almost 25 per cent in the past year compared to an increase of just 3.4 per cent in the Thomson Reuters Europe Airlines Index.

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