Lufthansa outlook and pay deal cheer market
Strong demand in US and Asia eases fears on ticket revenues
Lufthansa pilot on strike at Frankfurt Airport, Germany: Analysts have expressed concern that European airlines are engaging in a damaging battle for customers, putting more seats onto the market than there is demand for. Photograph: Kai Pfaffenbach/File Photo/Reuters
Lufthansa announced a higher than expected 2017 profit target on Thursday, saying a rebound in demand in the United States and Asia and a breakthrough pay deal with pilots had improved its prospects.
The German airline said it expected adjusted earnings before interest and tax (EBIT) to fall only slightly from €1.75 billion in 2016: analysts had predicted a slump in underlying profits this year to €1.38 billion.
Lufthansa‘s shares jumped nearly 6 per cent to trade above €15 for the first time in a year thanks to the profit target and the pay deal ending months of strikes by pilots struck a day earlier.
The carrier said it still expected ticket revenues to fall this year, but not by as much as the 6 per cent drop in 2016, and that its fuel bill would rise by about €350 million to €5.2 billion.
But it said trading had been good in the first few months of 2017 thanks to a rebound in U.S. and Asia demand and that its cost base would improve thanks to the deal with its pilots, even though it would only have a positive impact on underlying profit from next year. – Reuters