Fares are being slashed at Ryanair as Europe's biggest budget airline said its ticket prices are tumbling 20% this winter and will be cut by a further 10% over the next year.

The news came as Ryanair revealed it is beating the recession and against City expectations will turn a profit this year.

Despite its worst ever Christmas and diving €102 million (£91 million) into the red in the three months to the end of December, ­Ryanair said losses over the winter as a whole would not be as bad as feared.

Chief executive Michael O'Leary said the airline could make as much as €80 million for the full year to the end of March against previous predictions of break-even.

That means after the €215 million of profits banked last spring and summer, losses in the current trading quarter — traditionally its toughest — could be limited to as little as €23 million.

“We are the Lidl, Aldi, Ikea and McDonald's of the European airline industry — the best value and lowest cost provider by a distance,” O'Leary said.

“The longer and deeper this recession, the better it is for the lowest-cost producer, the better it is for us. People want better value.”

Deputy chief executive Michael Cawley said that Ryanair would hit its ­target of carrying 58 million passengers in the current financial year and could carry as many as 67 million next year — almost double the number being handled by British Airways.

The growth is coming on the Continent, with just 30% of Ryanair's business now originating in the UK.

“Continental Europe feels like the UK 10 or 15 years ago with the high fares and the weak competition retrenching,” Cawley said.

“We see substantial opportunities in Italy, which has become our second biggest market and 16% of our business, and in Germany, in Spain and in ­Scandinavia.”

In the Christmas third quarter, ­Ryanair dropped fares 9% to average just €34, and in doing so managed to attract 13% more passengers. Fares are currently being slashed by an average of 20% to keep people flying.

“We know very well there is a price point at which Britain keeps flying and we are at that point,” Cawley said. O'Leary believes Ryanair could be on a point of trouncing the opposition with much of the rest of the industry expected to remain deep in the red or go bust. Ryanair's fuel costs are set to tumble from the equivalent of $105 a barrel to $65 a barrel.