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UPDATE 2-BA owner IAG predicts travel demand to fuel profit rise

* IAG sees FY profit growing nearly 20 pct

* CEO sees growth opportunities from failed rivals

* Shares down 4 pct after 50 pct rise so far this year (Adds details)

LONDON, Oct 27 (Reuters) - British Airways owner IAG on Friday said it expected profits to rise by nearly 20 percent this year thanks to strong travel demand and lower costs, adding that it was looking at opportunities left by the collapse of rivals.

Air Berlin, Alitalia and Britain's Monarch have collapsed this year due to tough competition, yet some of Europe's major carriers, such as Lufthansa and now IAG have reported improving trends.

IAG's shares dropped nearly 4 percent, having hit an all time high on Wednesday, as analysts focused on the passenger unit revenue trend. The stock is up nearly 50 percent this year.

The British group said third-quarter operating profit before exceptional items rose 20.7 percent to 1.46 billion euros, slightly ahead of a company-compiled analyst consensus of 1.4 billion euros, due to improvements in Spain and Latin America.

The airline group, which also owns Iberia, Aer Lingus and Vueling airlines, said it expected operating profit for the full year to be 3 billion euros before exceptional items, up 18.3 percent on last year. It previously said it expected a double digit rise for the full year.

"All our companies performed well," Chief Executive Willie Walsh said in a statement. "Passenger unit revenue was up 2.2 per cent at constant currency boosted by improvements in the Spanish and Latin American markets."

Analysts at Liberum said that the consensus predictions for full-year profit were already pricing in strong double digit growth, and that the passenger unit revenue trend was weaker than at Lufthansa.

"We consider the results to be broadly encouraging, but there may be an adverse short-term reaction to the unit revenue trend," Liberum said in a note.

Walsh said that consolidation in the sector was good for the industry and for consumers, and left opportunities for more efficient players such as IAG to grow.

"IAG will continue to grow organically, and we've demonstrated we can do that efficiently," Walsh told reporters, adding that Vueling might have growth opportunities in Germany and Italy.

Walsh confirmed IAG's interest in acquiring Monarch's airport slots at Gatwick, although ambiguity remains over the process by which the slots will be assigned. (Additional reporting by Helen Reid and Victoria Bryan; editing by Kate Holton and Alexander Smith)