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* Upgrades full-year profit outlook by 21 pct
* Sees record traffic, load factor in August
* Shares up more than 6 percent (Adds analyst, investor reaction, share price)
By Kate Holton
LONDON, Sept 3 (Reuters) - EasyJet raised itsfull-year profit outlook on Thursday after record demand forbeach holidays and city breaks showed the British low-costairline was more than meeting a challenge from reinvigoratedrival Ryanair.
The airline said it was optimistic about its performance,forecasting full-year profit growth of up to 21 percent for theyear to end September, compared with a previous forecast of upto 14 percent. Its shares rose more than 6 percent and toppedthe FTSE 100 leader board.
The company said it had benefited from a desire for a lateAugust get away by Britons unimpressed with cool weather at homeand encouraged by a strong pound in their pocket. The poundreached a 7-1/2 year high against the euro in July.
The demand surge helped the group to bounce back from atricky period earlier in the year when it was hit by air trafficcontrol strikes in April and two fires at Rome's Fiumicinoairport.
It also shows that Europe's second biggest budget airlinecan take the competitive pressure from its larger Irish rivalwhich has polished up its image and started adding more maincity airports to its routes.
It carried a record 7.06 million passengers in the month, the second month in a row it had flown more than 7 millionpassengers. The load factor, or how full its planes were, wasanother record at 94.4 percent.
Chief Executive Carolyn McCall said this showed the strengthof the airline, with digital innovations complimenting itsstrong route network.
"This platform meant that easyJet was best placed tomaximise the strong late summer demand from UK passengers to getaway to beach and city destinations across Europe and willenable the airline to set new records for full year revenue andprofit," she said.
EasyJet said it now expected full-year profit before tax tobe in a range of 675 million pounds ($1 billion) to 700 millionpounds for the year to the end of September, compared withprevious guidance of 620 million pounds to 660 million pounds.
The group recorded full-year profit of 581 million pounds inits 2014 full year.
"A clearly positive update from easyJet today leading tomeaningful earnings upgrades," said Trevor Green, head ofinstitutional equities at Aviva Investors, a top 15 shareholder.
"Confounding the sceptics, the company continues to proveits proposition is highly attractive to consumers with recordload factors."
Stephen Furlong, analyst with stockbrokers Davy, said therewas clearly enough demand in Europe to support two largelow-cost carriers. But he said competition would increase in thefuture as rival challengers such as Vueling, NorwegianAir Shuttle and Wizz Air develop.
But with easyJet attracting high load factors, helping it topost a 2014 return on capital employed of 20.5 percent, Furlongexpected the company to continue to grow strongly.
Shares in the group were up 6.2 percent, giving it a marketcapitalisation of 6.64 billion pounds and making it the highestclimber on the FTSE 100 board. Ryanair was up 2.5 percent.
($1 = 0.6532 pounds) (Editing by James Davey and Jane Merriman)
