EasyJet hit by weaker pound as low-fare battle rages

* Sees (Shanghai: 600481.SS - news) 105 mln stg hit from FX, fuel vs 90 mln before

* Sees high single digit fall in H1 ticket prices

* Shares (Berlin: DI6.BE - news) fall as much as 10 percent (Adds shareholder comment, updates shares)

By Sarah Young

LONDON, Jan 24 (Reuters) - British low-cost airline easyJet said the weaker pound would hit profit more than expected this year, sending its shares lower on Tuesday as it battles to cope with the price war raging in Europe's short-haul travel market.

EasyJet (Frankfurt: A1JTC1 - news) , Europe's No.2 no-frills carrier behind Ryanair , and rival airlines, have driven down fares by adding more seats to try to grow market share during what has been a period of low oil prices.

The company said ticket prices were 8.2 percent lower in the three months ended Dec (Shanghai: 600875.SS - news) . 31.

At the same time, easyJet has faced a steep decline in the pound since Britain voted to leave the European Union in June.

That weakening, plus rising fuel costs, prompted the airline on Tuesday to say pretax profit for the year to Sept. 30, 2017, would take a 105 million pound ($131 million) hit, up from the 90 million pound blow flagged in November.

At 1430 GMT, easyJet shares were down 8.5 percent at 984.8 pence, erasing gains made over the last month.

"The (first-quarter) results were in line with expectations other than the guidance on currency and fuel which will probably drive about a ten percent downgrade to consensus (profit forecasts)," Numis analyst Wynn Ellis said.

Before Tuesday's announcement, analysts had been forecasting pretax profit would fall by 16 percent to 414 million pounds for the 12 months to Sept. 30.

Over the current financial year, easyJet plans to grow capacity by up to 9 percent. As fares have fallen, the airline's strategy has been to stick to its expansion plans, arguing it is well-positioned to emerge as a winner when higher fuel prices return and higher cost operators suffer.

But its founder and top shareholder, Stelios Haji-Ioannou, who owns about 33 percent of the company, disagrees. He said on Tuesday he would use some of his shares at the company's annual meeting in a protest vote against the expansion plan.

"The best way to increase the earnings per share and send the share price up again is to reduce the incremental aircraft in the fleet from 2018 onwards," Haji-Ioannou said.

EasyJet CEO Carolyn McCall told reporters on a call the airline could increase or defer aircraft at short notice, given its flexible arrangement with supplier Airbus.

"We have not activated any deferrals yet," she said. "That is still under review and that will be taken at board level as part of the strategic look at what we do."

STERLING EXPOSURE

While other carriers have also been affected by sterling weakness - Ryanair cut its profit forecast in October - easyJet is more exposed to the pound than others.

"It's worth bearing in mind that no other major airline reports in sterling or earns a similar proportion of its revenue in sterling," McCall said.

The pound has fallen 17 percent against the U.S. dollar since the Brexit vote, a headwind for easyJet as it buys fuel in dollars but earns about half its revenues from UK-based sales.

Fuel prices have also started to rise - they are up to about $53 a barrel from around $30 this time last year, impacting the minority part of easyJet's fuel bill which is not hedged.

A weaker pound also makes travel to Europe more expensive for those departing from Britain, but easyJet said demand from UK leisure passengers was strong, with Britons factoring in the new exchange rate into their holidays.

"There's no evidence at the moment that Britons are staying at home and having holidays only at home," McCall said.

EasyJet is trying to counter declining ticket prices by cutting costs, but competition is such that it expects ticket prices to decline by a high single-digit percentage in the first half of the year, at the top end of guidance given in November.

($1 = 0.8013 pounds) (Reporting by Sarah Young; Editing by Costas Pitas and Mark Potter)