RYAAY Ryanair Holdings PLC

LONDON—Ryanair Holdings PLC has raised its fiscal-year profit target by as much as 26%, as Europe's biggest budget airline said it would carry more passengers and sell tickets at better prices than expected.

The airline said on Wednesday it should report net profit of around €1.18 billion euros ($1.3 billion) to €1.23 billion for the year to end-March. That represents a big improvement on a previous forecast of profit nearer the top end of a projected range of €940 million to €970 million.

Ryanair, Europe's largest low-fare airline by passenger numbers, said fares in the three months to end-December are now likely to be flat compared with the same period the previous year. The airline had previously expected a decline of as much as 8%.

The company said it expects to carry 104 million passengers, one million more than in its earlier forecast. It began the year with an estimate of 100 million passengers.

The Dublin-based carrier's upbeat outlook follows a series of bullish forecasts and evidence of strong traffic growth among its European rivals such as easyJet PLC, Norwegian Air Shuttle, and Wizz Air PLC. EasyJet, Europe's No. 2 discount carrier, last week raised its fiscal-year profit figure to end-September to a range of £ 675 million ($1.04 billion) to £ 700 million, from £ 620 million to £ 660 million.

The budget airlines have seen planes filled near capacity with load factors—a measure of seats sold—in the key summer period exceeding 90%.

"We have been surprised by the strength of close-in bookings and fares this summer during which we delivered record 95% load factors in both July and August while fares grew by over 2%, when we had expected them to be flat," Ryanair Chief Executive Michael O'Leary said.

Ryanair investors also are poised to a potential further gain as the budget airline decides what to do with around €400 million it received for the sale of its 29.8% stake in Aer Lingus Group to British Airways-parent International Consolidated Airlines Group SA.

Ryanair Chief Financial Officer Neil Sorahan said the airline would decide ahead of its annual shareholder meeting on Sept. 24 what to do with the money. The carrier has a history of paying special dividends and buying back its own stock.

The bullish outlook is further vindication of Ryanair's recent shift in strategy. In the past two years, Ryanair has moved its operations to more primary airports and sought to win business travelers, helping it boost returns.

The airline also has benefited further from low fuel prices amid a sustained slump in crude oil. Though much of its fuel costs are locked in through hedges, or financial instruments used to secure future prices and gain certainty over costs, it has benefited on the unhedged portion of its fuel consumption.

Ryanair, which tends to provide conservative guidance, warned there was still uncertainty to its outlook, with only about 30% of tickets sold for its fiscal third quarter ending in December and no visibility for the rest of the financial year.

The airline said it expects "downward pressure" on fares and yields in the winter as it expands in major European Union markets such as Germany while rivals are likely to use low fuel prices to discount more heavily.

Ticket prices in the January through March period are now expected to contract 2% to 4%, Mr. Sorahan said.

The airline has benefited from a number of nonoperational factors, such as bad weather in Northern Europe and a strong British currency, Mr. O'Leary said.

Ryanair also said it has recovered all of the funds from fraudulent electronic transfer to a Chinese bank earlier in the year. Less than $5 million was at stake, the airline said, adding it had taken measures to prevent a repeat of such a transfer.

Write to Robert Wall at robert.wall@wsj.com

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(END) Dow Jones Newswires

September 09, 2015 04:15 ET (08:15 GMT)

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