UPDATE 1-Ryanair considers dividend payout as profits grow

* Keeps FY earnings forecast, cuts passenger target

* Mulls first ever dividend; sees FY fares down 20 pct

* 3rd Aer Lingus bid unlikely but not ruled out

* Ryanair shares down 0.3 pct

(Adds more CEO quotes, share price)

DUBLIN, Sept 24 (Reuters) - Irish airline Ryanair (RYA.I) is considering breaking with tradition and paying shareholders a one-off dividend as it expects a strong rise in profits this year, its chief executive said on Thursday.

Europe's largest budget carrier is still producing earnings growth unlike rivals such as British Airways BAY.L and Air France-KLM (AIRF.PA) but it has been forced to slash fares to fill aircraft as a global recession crimps consumer demand.

Michael O'Leary told the company's annual meeting in Dublin that it expects average fares to fall by about 20 percent over the full year and cut its full-year traffic target to 66 million passengers from 67 million largely due to capacity cuts at its main hubs Dublin and London Stansted.

But O'Leary said he still expected full-year adjusted net profit to about double from last year, maintaining his forecast at the lower end of a 200 million to 300 million euro range.

Ryanair is consequently considering the possibility of spending some of its 2.5 billion euro cash pile on a one-off dividend or share buybacks, he said.

Ryanair would still retain much of its cash, partly to save resources as talks about more aircraft orders with Boeing (BA.N) and, "less intensively", with Airbus (EAD.PA) continue.

He also said he was unlikely to launch a third bid for former Irish state carrier Aer Lingus (AERL.I), which is fighting for survival due to falling demand, but has rejected two previous bids from Ryanair, its biggest shareholder.

"I can't foresee circumstances in which we would be interested in bidding again, but you never say never," O'Leary told reporters. "I don't believe Aer Lingus has a future as a standalone independent airline."

Shares in Ryanair were down 0.3 percent by 1213 GMT at 3.6 euros, while the wider Irish market .ISEQ was down 0.8 percent.

(Reporting by Andras Gergely; additional reporting by Carmel Crimmins; editing by Elaine Hardcastle)