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(Adds 'in terms of traffic' in paragraph 6.)
* Budget carrier to cut winter fares by more than 10 percent
* Full-year profit up 43 pct, in line with forecasts
* Expects profit growth to slow to 13 pct in 2016/17
* Low fares could weigh on profit by 2018
By Conor Humphries
DUBLIN, May 23 (Reuters) - Ryanair, Europe's largestlow-cost airline, is prepared for a fare war to break out laterthis year and will cut its own fares sharply to increase itsmarket share to sustain profits, it said on Monday.
The Irish airline, Europe's largest by passenger numbers,also reported a 43 percent increase in net profits to 1.24billion euros ($1.39 billion) in the year ended March 31, inline with analysts' forecasts.
The cuts in fares, which will be focused on the winterseason, will heap further pressure on rivals who have alreadywarned about the impact of increasing competition on fares andhave trimmed some plans for increases in capacity as a result.
Ryanair's profit growth will also slow to 13 percent in theyear to end-March 2017, with its fares expected to fall by anaverage of 7 percent over the year and by between 10 percent and12 percent in the winter months compared with a year ago, ChiefExecutive Michael O'Leary said.
"If there is a fare war in Europe, then Ryanair will be thewinner," he said in a video presentation following publicationof its results. Any revision to the forecast for average fareswas more likely to be down than up, he added.
The lower fares will enable Ryanair to boost its passengernumbers by 9 percent to 116 million passengers, increasing itsleadership of European aviation in terms of traffic.
"This is a competitive signal to the legacy incumbents thatthis winter Ryanair intends to take further share," Investecanalyst Robert Murphy said.
Rivals including British Airways owner IAG,Lufthansa and Air France-KLM have warnedrecently about the impact of increasing competition on fares.
Lufthansa Chief Executive Carsten Spohr told reporters lastweek there was "too much capacity in the market."
O'Leary also said he was more cautious than rivals about thesummer period, when European airlines make almost all of theirprofit, saying fares in the three months to the end of Septemberwould be "flat if not slightly down."
He warned, however, that the combination of falling faresand increasing oil prices could weigh on profitability in theyear to March 2018.
Ryanair described as "cautious" a forecast of a rise inprofit to between 1.38 billion euros and 1.43 billion euros forthe current financial year. That is short of the consensusmarket forecast of 1.47 billion euros according to a poll ofmore than 10 analysts conducted by the company.
Ryanair's shares outperformed rivals last year as itimproved its customer service without increasing fares, but itsshare price performance has been in line with that of the sectorsince the start of the year.
Ryanair shares were up 1.5 percent at 13.41 euros at 0925GMT on Monday. On a morning that the oil price fell around 1percent, rival easyJet's shares were up 0.5 percent at14.77 pounds while Lufthansa, IAG and Air France's shares wereall up between 1 and 2 percent. ($1 = 0.8906 euros) (Editing by David Goodman and Greg Mahlich)
