European airlines have struggled to overcome a toxic mix of high oil prices and sluggish demand in recent months, with low-cost airlines expected to pick up more business as struggling European consumers trade down.

Since the start of the year, some airlines, including loss-making Spanair and Hungarian flag-carrier Malev have ceased operations, leaving gaps in the market that low-cost competitors have been quick to exploit.

Others, including German flagship airline Lufthansa (LHAG.DE) and the country's second-largest carrier, Air Berlin (AB1.DE), are looking to cut costs as a way to improve operating performance.

"In a difficult environment for all airlines, improvements in revenue management combined with marketing and website initiatives have enabled EasyJet to take advantage as weaker competitors have left the market over the last couple of months," Luton, southern England-based EasyJet said on Monday.

EasyJet (EZJ.L) said it now expects a first-half loss of 110 million to 120 million pounds, down from previous estimates of 140 million to 160 million pounds.

Shares in the company were 7.5 percent higher at 496 pence, their highest level in nearly two years, at 0839 GMT and were the second-biggest gainers on Britain's midcap FTSE 250 .FTMC index.

"We continue to be impressed with EasyJet's operational and financial performance in a difficult market environment and it is emerging as a very clear winner in the aviation market in Europe," Numis analyst Wyn Ellis said.

Monday's statement comes two months after EasyJet posted strong growth in quarterly revenue, helped by an uplift in the number of business travellers flying with the airline and milder winter weather.

"We hope that Sir Stelios will show his appreciation by allowing management to get on with the job," the analyst added, in a reference to the airline's founder and largest shareholder Stelios Haji-Ioannou, who has repeatedly clashed with the company's board.

Investec analyst James Hollins said EasyJet was driving better-than-expected yields, as well as benefiting from the failure of competitors. The analyst added that margin management and cost efficiencies had also helped.

The company said its continued focus on cost control for the year helped it deliver improvements in ground handling and airport charges, with total cost per seat ex-fuel for the first half now expected to be up around 1.5 percent.

The increase in total revenue per seat at constant currency for the first half of the year will be better than expected at a little over 10 percent, EasyJet added.

The airline acknowledged, however, that the operating environment for airlines would continue to be "difficult."

Investec's Hollins also cited "a number of headwinds" in the second half, including fuel costs, and did not raise his rating or price target on the company's stock.

(Reporting by Adveith Nair; Editing by Hans-Juergen Peters and Erica Billingham)

• A Permanent Economic Emergency