EasyJet upbeat after surge in demand for late-summer sun

* Upgrades full-year profit outlook by 21 pct

* Sees (Shanghai: 600481.SS - news) record traffic, load factor in August

* Shares (Berlin: DI6.BE - news) up more than 6 percent (Adds analyst, investor reaction, share price)

By Kate Holton

LONDON, Sept 3 (Reuters) - EasyJet (Other OTC: EJTTF - news) raised its full-year profit outlook on Thursday after record demand for beach holidays and city breaks showed the British low-cost airline was more than meeting a challenge from reinvigorated rival Ryanair.

The airline said it was optimistic about its performance, forecasting full-year profit growth of up to 21 percent for the year to end September, compared with a previous forecast of up to 14 percent. Its shares rose more than 6 percent and topped the FTSE 100 leader board.

The company said it had benefited from a desire for a late August get away by Britons unimpressed with cool weather at home and encouraged by a strong pound in their pocket. The pound reached a 7-1/2 year high against the euro in July.

The demand surge helped the group to bounce back from a tricky period earlier in the year when it was hit by air traffic control strikes in April and two fires at Rome's Fiumicino airport.

It (Other OTC: ITGL - news) also shows that Europe's second biggest budget airline can take the competitive pressure from its larger Irish rival which has polished up its image and started adding more main city 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 million passengers. The load factor, or how full its planes were, was another record at 94.4 percent.

Chief Executive Carolyn McCall said this showed the strength of the airline, with digital innovations complimenting its strong route network.

"This platform meant that easyJet was best placed to maximise the strong late summer demand from UK passengers to get away to beach and city destinations across Europe and will enable the airline to set new records for full year revenue and profit," she said.

EasyJet said it now expected full-year profit before tax to be in a range of 675 million pounds ($1 billion) to 700 million pounds for the year to the end of September, compared with previous guidance of 620 million pounds to 660 million pounds.

The group recorded full-year profit of 581 million pounds in its 2014 full year.

"A clearly positive update from easyJet today leading to meaningful earnings upgrades," said Trevor Green, head of institutional equities at Aviva Investors, a top 15 shareholder.

"Confounding the sceptics, the company continues to prove its proposition is highly attractive to consumers with record load factors."

Stephen Furlong, analyst with stockbrokers Davy, said there was clearly enough demand in Europe to support two large low-cost carriers. But he said competition would increase in the future as rival challengers such as Vueling, Norwegian Air Shuttle and Wizz Air (LSE: WIZZ.L - news) develop.

But with easyJet attracting high load factors, helping it to post a 2014 return on capital employed of 20.5 percent, Furlong expected the company to continue to grow strongly.

Shares in the group were up 6.2 percent, giving it a market capitalisation of 6.64 billion pounds and making it the highest climber on the FTSE 100 board. Ryanair was up 2.5 percent.

($1 = 0.6532 pounds) (Editing by James Davey and Jane Merriman)