Ireland-based budget airline Ryanair Holdings PLC (RYA.LN) said Monday that it swung to a net loss in its fiscal third quarter as a drop in average fares and a weaker Sterling weighed but noted that bookings have picked up recently, which should ensure that full-year guidance is met.

The company lowered its full-year net profit guidance last quarter to EUR500 million-EUR520 million as lower average fares hit its winter period but said Monday it was confident it would still hit that target.

"We reacted quickly to last autumn's weakness with a range of lower fares, seat promotions, and recently increased advertising and marketing spending," the company said. "As a result, forward bookings in the fourth quarter and into FY15 are running significantly ahead of last year, albeit at weaker yields."

Ryanair, Europe's largest discount airline, reported a third-quarter net loss of EUR35.2 million, down from a profit of EUR18.1 million a year earlier. Revenue was little changed at EUR964.4 million.

Income from initiatives such as reserved seating, so-called "ancillary revenue," grew 13% and helped offset lower fares, the company added.

The company is changing its business model as it faces increasing competition from fast-growing carriers such as Norwegian Air Shuttle ASA (NAS.OS) and Hungary's Wizz Air as well as local rival easyJet PLC (EZJ.LN) and Vueling, the Barcelona-based unit of International Consolidated Airlines Group (IAG.LN).

After years of focusing on cost, Ryanair is having to look elsewhere to protect and grow market share. The discount carrier is going after business travelers with allocated seating, flexible ticketing and flights to primary airports. It is also overhauling its website and has cut baggage fees while its abrasive chief executive, Michael O'Leary, is taking on less public exposure in a recent management shuffle.

Write to Dominic Chopping at dominic.chopping@wsj.com

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