DEMAND for no-frills flights across Europe shows no signs of abating as Ryanair's full-year profits surged.

The Dublin group, which has operations at Teesside Airport, has spent the last year building up its European service, including new routes to Germany.

The strategy has paid off, with final sales improving from £314.9m to £403.2m.

That was despite the effects of foot-and-mouth disease and September 11 on tourism, as well as an eight per cent reduction in average fares during the year to March 31.

Passenger traffic grew 38 per cent to 11.1 million, while load factor - a key industry measurement showing passengers as a proportion of available seats - rose to 81 per cent.

Full-year pre-tax profits increased from £79.7m to £111.4m.

Chief executive Michael O'Leary said the figures were outstanding and he was confident the group would continue to grow this year.

He said: "Since Ryanair will continue to reduce fares, the price gap between us and all of our competitors is getting wider. As these robust results demonstrate, Ryanair is, and will continue to be, the fastest growing, and most profitable, and lowest cost, low-fares airline in Europe."

Mr O'Leary remained unconcerned by rival easyJet's recently announced deal to snap up fellow low-cost operator Go. EasyJet has not ruled out operating flights from Teesside International, in direct competition to Ryanair.

Mr O'Leary said: "EasyJet's average fare is almost 60 per cent higher than Ryanair's and yet our margins are more than double theirs.

"Ryanair's cost base is substantially lower than easyJet or Go or any other airline in Europe and is continuing to decline on a per seat basis."

The airline reported a 42 per cent reduction in marketing and distribution costs over the year, mainly through the development of its website.

At the same time, it took delivery of ten Boeing 737-800s and established bases at Brussels Charleroi and Frankfurt Hahn.

Mr O'Leary said the group's foray into Germany had been a success, and about two million people were expected to fly on its German routes this year.

Michael Cawley, commercial director and chief financial officer, said the group aimed to grow this year by between 30 per cent and 35 per cent, with growth focused on new routes, increased frequency and at least one more European base.

Ryanair will also build up its Belgian and German operations following initial successes in those countries.

Mr Cawley also echoed Mr O'Leary's sentiments over the easyJet/Go deal.

He said: "I'm not saying they're not good operators but they will never have the opportunities for growth that we do."