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UPDATE 4-Upbeat Ryanair says industry slump not ended yet

* Low-cost carrier says still gaining market share

* Trims Q3 loss, beating expectations

* Increases full-year profit forecast to 275 million euros

* Says yields to drop less sharply than thought

* Shares rise 6.6 percent; top European blue chip gainer (Adds CEO comment from analyst call)

By Andras Gergely and Rhys Jones

DUBLIN/LONDON, Feb 1 (Reuters) - Irish airline Ryanair RYA.I raised its profit forecast and said an industry slump it has exploited to expand rapidly at the expense of less nimble rivals was set to continue, sending its shares sharply higher.

Europe's biggest low-cost airline led blue-chip risers after it said it was still gaining market share from leading flag carriers Air France-KLM AIRF.PA and British Airways BAY.L -- which have signalled their business is stabilising -- and Deutsche Lufthansa LHAG.DE. [ID:nL6071715] [ID:nLI204915]

“The environment out there is, from Ryanair’s perspective, great, because it’s awful,” Chief Executive Michael O’Leary said. “It’s really difficult out there, we’re doing remarkably well because this is the time when the lowest cost producer wins,” he told analysts.

He said consumer confidence remained low but Ryanair’s fares were declining less than anticipated after it cut loss-making winter capacity in Britain and Ireland and replaced it with more promising new routes, with some of the best growth prospects in France, Germany and Spain.

“I’d say Ryanair has turned the corner in demand terms, especially in continental Europe, from what was a very low period at the start of 2009,” Deputy Chief Executive Michael Cawley told reporters in London.

Ryanair, which in December broke off talks with Boeing BA.N on a potential order of up to 200 aircraft, [ID:nLDE5BH07U] said it was still planning to scale back investments from 2013, when it could start returning cash to shareholders.

Bloxham analyst Joe Gill said the results would reinforce investors’ confidence in the airline’s low-cost model.

“It’s performing very well in a very difficult environment,” Gill said.


* For a graphic on Ryanair's earnings performance and market value compared with Europe's three other big airlines, click: here ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

To meet its long-term profit growth targets, the firm would have to raise fares at some stage, it said.

Ryanair, which last year posted its first loss in 20 years after writing down the value of its minority stake in former takeover target Aer Lingus AERL.I, said in January fares would stay flat on average during the current calendar year.


Its shares rose 6.6 percent to 3.57 euros by 1602 GMT, making it the biggest percentage gainer on a FTSEurofirst 300 index .PGL.FTEU3 that rose 0.3 percent. Aer Lingus, which has been struggling to turn profitable, said last week it would try to position itself somewhere between Ryanair's no-frills model and full-service carriers to increase revenue. [ID:nLDE60P06Y]

“People who generally standin the middle of the road generally get run down by a juggernaut,” Ryanair’s Chief Financial Officer Howard Millar told Reuters. He reiterated however that Ryanair was unlikely to make a third bid for its smaller Irish competitor.

Ryanair’s net loss of 10.9 million euros ($15.3 million) in the third quarter to the end of December compared with a 118.8 million euro net loss a year earlier and a forecast for a net loss of 35.1 million euros by in-house broker Davy.

The airline increased its net profit guidance for the full year to 275 million euros from the lower end of a range of 200 million to 300 million.

O’Leary said profits would grow over the next 12 months though he could not give a precise forecast for the next financial year, starting in April.

Revenue increased by 1 percent in the third quarter to 612 million euros and fares fell less than expected, allowing it to trim a forecast fall in full-year yields -- a measure of average fare levels -- to closer to 15 percent than the 20 percent it had expected.

($1=.7122 euros)