BUDGET airline easyJet is forecasting continued growth - despite seeing annual profits drop by a quarter.

The company also revealed that flights from Newcastle had been a key driver of performance and was its fastest growing UK airport.

Integration of 120 planes from Airbus, increasing frequency on its existing routes and expansion plans to new hubs in Europe meant the outlook was good, the company said.

EasyJet delivered pre-tax profits of £52m for the year to September 30, but these were down 28 per cent after the war in Iraq led to a drop in passenger numbers.

The carrier, based in Luton, also absorbed £7.9m in costs from the integration of smaller rival Go, which it bought last year.

The integration of Go spurred two-thirds of the 69 per cent growth in annual revenues to a new high of £932m, the company said.

Passenger numbers jumped 79 per cent to 20.3 million, with 52 per cent of this increase coming from Go flyers.

Chief executive Ray Webster said he was "cautiously optimistic" about the performance in the current year.

He said: "Although there remains a degree of uncertainty, the economic environment is improving and is substantially better than at this time last year."

Easyjet has recently announced flights to Copenhagen and Malaga to be launched from Newcastle Airport next month, with Berlin following in May next year.

Marketing manager Moira Findlay said Newcastle was the company's fastest growing UK airport, adding that ten destinations would be available from Newcastle from May as part of a growing roster which included Barcelona, Alicante, Paris and Prague.

She said: "This time last year, we only had one service from Newcastle which was to Stansted, but the uptake since then from North-East passengers in response to the new services has been great."

Figures show that 625,000 passengers have flown easyJet from Newcastle this year.

About 140 easyjet staff work at the airport, including cabin and flight crew and ground staff.

Shares closed down 6p at 271p.