Irish low-cost giant Ryanair plans to cut fares sharply in coming months, but said it expects to boost profit by boosting its share of an increasingly competitive European short-haul market.

The airline, Europe's largest by passenger numbers, outlined the planned cut to fares today as it reported net profit of €1.24 billion for the year ended March 2016, an increase of 43 percent on the previous year.

Fares will fall by an average of 7 percent in its current financial year, which ends on March 31, with fares falling by between 10 and 12 percent in the winter months, chief executive Michael O'Leary said.

"If there is a fare war in Europe, then Ryanair will be the winner," he said in a video presentation.

Ryanair expects to carry 116 million passengers in the year to March, an annual increase of 9 percent.

Ryanair said in a statement it "cautiously" expected net profit to increase by approximately 13 percent in the year to March 2017, to between €1.38 billion €1.43 billion, less than the consensus of €1.47 billion in a poll of over 10 analysts compiled by the company ahead of the results.

Rivals including British Airways-owner IAG, Lufthansa and Air France-KLM have warned recently about increasing capacity in the sector and the impact on tourism from militant attacks in Paris and Brussels.

easyJet earlier this month said strong demand for beach holidays was making up for a drop in travelling in the wake of the attacks. Ryanair shares closed Friday up 20 percent compared to a year ago at €13.16, while the Thomson Reuters European Airline Index was down 3 percent. Ryanair shares have fallen 12 percent since the start of the year, in line with the index.