* Profit up 66 pct in year to March 31
* Eyes 10 percent growth in current financial year
* Says half of 10 mln new passengers will be at primaryairports
* Does not expect to make summer fare cuts (Recasts, adds CEO and analyst comments, updates shares)
By Conor Humphries
DUBLIN, May 26 (Reuters) - Ryanair forecast a 10percent rise in profit and passenger numbers in its currentfinancial year as it targets more primary airports and improvesits online offering to compete better with rivals such aseasyJet and former flag carriers.
The success of its recent image makeover, however, means theIrish airline does not expect to have to slash prices to gainmarket share. After posting full-year profit up 66 percent,Chief Executive Michael O'Leary said average fares would remainbroadly flat in the key summer months, while easyJet expects a 4percent drop in revenue per seat in the three months toJune.
Ryanair has made huge strides in catching up with rivalssince launching its Always Getting Better campaign last year toshake off a reputation for terrible service. The scheme hasincluded lower fees, flexible tickets for business travellersand a shift away from small regional airports.
The profit jump in the year to March 31 was on passengernumbers up 11 percent, compared with an original estimate of 4percent. Its share price is up 67 percent from a year ago,against a fall of 2.6 percent for the Thomson Reuters Europeanairline index
"Even we have been surprised at how customers have respondedto the customer improvements," O'Leary said in a conferencecall.
He made repeated comparisons with easyJet, whose highprofitability in 2013 prompted Ryanair to change its businessmodel and target customers who are less price-sensitive.
Ryanair was hit less hard than easyJet by French air trafficcontrol strikes in April, O'Leary said. The strikes cost Ryanairless than 5 million euros ($5.5 million), he said, against the25 million pound ($38.5 million) hit reported byeasyJet.
O'Leary also released a slide detailing how Ryanair hadpoached passengers on a number of London routes, including toEdinburgh, Glasgow, Lisbon and Cologne.
'COMPETING AND BEATING'
"Increasingly we are competing and beating easyJet onservice, both in terms of frequency, punctuality and customerexperience, and going after that key business market," he said.
Analysts and investors were more sceptical, pointing outthat Ryanair and easyJet compete directly on less than 5 percentof routes, a number that is closer to 30 percent when calculatedby city pairs rather than airport pairs.
While Ryanair has a clear cost advantage, it will take along time to build up its position in key airports, Investecanalyst Robert Murphy said. "EasyJet has been operating at theseairports, not just since last year, but since the turn of themillennium."
Some investors took fright when easyJet's warning about adrop in revenue per seat prompted suggestions that Ryanair wouldmake aggressive price cuts.
However, O'Leary said fares would be "broadly flat" in thesix months to September, which he later clarified as falls ofbetween 0 percent and 2 percent.
"Everyone was holding their breath for the past fortnight,waiting for the largest low-cost carrier to show the way ... Thesector can exhale now," Investec's Murphy said.
Pauline McPherson, co-fund manager at the Kames GlobalEquity Fund, said that the biggest positive from Ryanair'sresults day was commentary that rivals were cutting routesrather than dropping fares, effectively conceding that theycannot compete.
"This is now a travel offering that is far more comparable,in terms of route and passenger experience, with the flagcarriers," she said.
Ryanair shares were up 4.9 percent by 1515 GMT, against a 2percent gain for easyJet.($1 = 0.9168 euros) (Additional reporting by Simon Jessop; Editing by DavidGoodman)