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Lufthansa profit forecast boosts shares


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Lufthansa profit forecast boosts shares

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Lufthansa has said it expects profits to fall only slightly this year despite lower fares and a rising fuel bill. Analysts had been predicting a sharp decline in earnings.

That news substantially boosted the German airline’s shares as it announced operating profit was down 3.6 percent in 2016 at 1.75 billion euros.

“We feel well equipped to be successful in 2017 in a continuing challenging environment,” Chief Executive Carsten Spohr said.

Strike settled

Investors also reacted positively to fact that one day earlier it had reached a surprise deal with its pilots on pay, pensions and working practices, ending the threat of more strikes and cutting the airline’s pilot costs by about 15 percent.

Lufthansa’s Chief Officer of Corporate Human Resources, Bettina Volkens said: “We really struggled hard to find a solution and I am convinced that we have found a solution that takes everyone into account. The needs of the customers, security for people to be able to plan, for our pilots, who now really do have future and career possibilities, which was particularly important. But also for us because we can now firm up our competitive position.”

That deal still requires some details to be negotiated.

Overcapacity

Like its rivals, Lufthansa saw ticket prices come under pressure in Europe last year due to overcapacity and fierce competition from carriers with a lower cost base.

European airlines have been fighting for market share, putting more seats onto the market than there is demand for, which is likely to mean lower profits this year for many of them.

Lufthansa has said it will increase capacity by 12 percent this year. Of that, eight percent is thanks to the takeover of Brussels Airlines and a deal to lease 38 planes and crew from Germany’s Air Berlin.

The group also includes Austrian Airlines, Swiss and Eurowings.

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