By Conor Humphries

DUBLIN (Reuters) -Ryanair (RYA.IR) on Monday reported strong demand across Europe and projected that fares would rebound to recover much of the decline that dented profit last year as consumers struggled with high interest rates.

"Demand is robust all across the network," Chief Financial Officer Neil Sorahan told Reuters in an interview. "We operate into 37 different countries. We're seeing strong summer demand everywhere."

The Irish low-cost carrier, Europe's largest airline by passenger numbers, reported a 16% fall in annual profit for the 12-month period ended March 31, as softer demand and a dispute with online travel agents drove fares down by 7%.

"We're delighted that we're going to be recovering most of that 7%, just not all of it. So, I think that that's a fairly good turnaround," Sorahan said.

The increase in average fares of near 7% compares with a forecast of 4-6% made by Chief Executive Michael O'Leary in March.

Ryanair shares were up 3.4% at 23.17 euros at 0733 GMT. They fell as low as 13.41 euros last July after the airline reported a 15% fall in average fares in the first quarter.

O'Leary could be in line for a bonus of close to 100 million euros if the share price remains above 21 euros for 28 days. It has been trading above that level since May 2.

The airline said fares for the three months ending in June are expected to rise by a "mid-to-high teen percent" year-on-year, largely driven by the timing of Easter.

Summer bookings are running around 1% ahead of the same period last year, O'Leary said.

After-tax profit for Ryanair's financial year came in at 1.61 billion euros ($1.8 billion), in line with a company poll of analysts.

The airline expects "modest unit cost inflation" in the current financial year as new aircraft, fuel hedging and cost control help to offset increased air-traffic control charges and higher environmental taxes.

Citi analysts said in a note that investors were likely to react positively to the forecast of only modest cost inflation and the fare recovery estimate.

DELIVERIES ON TRACK

Ryanair flew a record 200 million passengers over the 12 months after trimming an earlier 205 million target due to delivery delays from Boeing. It expects to fly 206 million passengers in the year to March 31, 2026.

"We're in good shape on the deliveries," Sorahan said.

Ryanair would expect Boeing (BA) to honour the agreed prices on current aircraft orders even if the European Union imposes reciprocal tariffs and that the airline would reserve the right to cancel if not, Sorahan said, echoing earlier comments by O'Leary.

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"If we were to see an increase in our prices, then we'd have to reserve our right to delay, cancel, or buy elsewhere," said Sorahan, whose airline is one of Boeing's largest customers.

($1 = 0.8941 euros)

(Writing by Conor Humphries; Editing by Sherry Jacob-Phillips and Louise Heavens, Kirsten Donovan)