LOW-cost airline easyJet yesterday announced a 21 per cent improvement in annual profits but warned it expected competition to remain intense this winter.

The budget operator reported a pre-tax figure of £62.2m for the year to September 30, a performance helped by a 20 per cent gain in passenger numbers to 24.3 million as well as the presence of fewer exceptional items than last year.

Chief executive Ray Webster described the results as creditable, but forecast challenging months ahead, with "limited visibility" on fares.

As with other airlines, easyJet is facing pressure on overheads after its annual fuel bill increased by nearly 22 per cent on a year earlier to £146.9m. That represented 14 per cent of spending and prompted a further drive to focus on costs.

The company, which operates flights in the North-East from Newcastle Airport, said savings had been achieved through the addition of more fuel-efficient Airbus A319s and the withdrawal from poorly-performing markets or over-priced airports.

During the year, easyJet increased its network to cover 153 routes and 44 airports, up from 105 and 38 respectively, following the addition of services to another six cities.

At the same time, easyJet said it faced competition from new entrants into the low-cost airline market in Europe. There are now at least 47 such operators, compared with only seven three years ago.

That competition led to a fall in easyJet's yield per passenger from £43.28 last year to £42.28 this year. But with the airline's planes fuller than a year earlier, total revenues grew by 17.1 per cent to £1.09bn.

Yesterday's full-year results represent an improvement on forecasts in June, when the airline said profits might only just beat last year's level of £52m.