DUBLIN (Reuters) - Ryanair (RYA.I), Europe's biggest budget airline, raised its full-year profit forecast after higher fares, lower than expected fuel costs and a surge in demand after the Olympics helped it beat first-half expectations.
The Ireland-based airline, waiting to hear whether EU regulators will approve its takeover of domestic peer Aer Lingus (AERL.I), also said on Monday it was benefiting from the demise of European rivals such as Spanair and Hungarian firm Malev.
Many airlines have been hit hard by Europe's struggling economy and high fuel costs. Ryanair has fared better than most, thanks to its size and focus on low costs and low prices.
"It was a strong performance after the Olympic Games, we certainly saw an upward rise in average fares. Many people who appeared to stay at home ... came back in force post the Olympic Games," Chief Financial Officer Howard Millar told Reuters.
Ryanair said its fares rose 6 percent in the six months ended September, while passenger numbers surged 7 percent.
As a result, it lifted its profit forecast for the year ending March 2013 to 490-520 million euros ($629-$668 million) from its previous guidance of 400-440 million euros.
"A very impressive set of results ... with a sizeable upgrade from the Q2 results. We expect Ryanair to outperform near term and recover some of the relative underperformance versus easyJet (EZJ.L)," said Goodbody Stockbrokers analyst Donal O'Neill, referring to Ryanair's British arch rival.
At 1340 GMT, Ryanair shares were up 6.6 percent at 4.85 euros, the biggest rise by a European blue-chip stock .FTEU3.
Shares in European airlines Air France-KLM (AIRF.PA) and Lufthansa (LHAG.DE) both rose towards the end of last week after posting reassuring results on Thursday.
Ryanair said its first-half net profit rose to 596 million euros from 544 million a year ago and ahead of analyst expectations at 564 million. Revenue jumped 15 percent to 3.1 billion euros.
Ryanair makes most of its money from leisure travellers and normally records a loss in its seasonally quieter second half.
The airline, with an average fare of 53 euros, said it was cautious on winter trading due to low visibility on fourth-quarter bookings, but expected the positive trends to continue, with good forward bookings into the third quarter.
"We expect fares will rise for the full-year by about 4 percent ... about 1 percent higher than we expected, and our fuel bill will be down a bit more than we had previously guided," said Millar.
Chief Executive Michael O'Leary told Reuters Digital Video that Spanish and Italian taxes had contributed to higher fares.
Ryanair's fuel bill was lower than expected due to a fuel saving programme which manages the way pilots fly aircraft and where they buy fuel, said Millar. The airline now expects its fuel bill to rise 260 million euros this financial year, 40 million euros less than previously assumed, he added.
Oil prices will fall however over the medium-term, said O'Leary, who called on oil futures to be investigated for market manipulation in the wake of the rigging of the benchmark interest rate Libor.
"I still do not understand why, for example, oil futures are so high ... we are still waiting for some regulator to investigate them," said O'Leary.
Ryanair has offered concessions to EU antitrust regulators in an effort to secure regulatory clearance for its proposed 700 million euro takeover of Aer Lingus.
The remedies include "at least two up-front buyer(s)" for routes that could be sold to ease competition fears, O'Leary said in a separate statement on Monday.
Ryanair, which carried 48 million passengers in the first half, said it was on target to grow its full-year traffic by 4 percent. Over the next decade, it aims to grab an 18 percent share of the European short-haul air travel market from its current 12 percent.