Lufthansa shares boosted by upbeat profit target

Lufthansa announced a higher than expected 2017 profit target on Thursday, saying a rebound in demand in the US 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 E1.75b in 2016 whereas analysts had predicted a slump in underlying profits this year to E1.38b. Lufthansa's shares jumped nearly 6% to trade above E15 for the first time in a year and were 4.4% higher at 1213 GMT, thanks to the profit target and the pay deal ending months of strikes by pilots struck a day earlier. Like its rivals, Lufthansa's ticket prices came under pressure in Europe and elsewhere last year from overcapacity and fierce competition from airlines with a lower cost base. The carrier said it still expected ticket revenues to fall this year, but not by as much as the 6% drop in 2016, and that its fuel bill would rise by about E350m to E5.2b. But it said trading had been good in the first few months of 2017 thanks to a rebound in US 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. "We saw an encouraging trading environment in January and February and ... the year started with a real breakthrough on the labor side," CE Carsten Spohr said. Wednesday's deal on pay and pensions with pilots is expected to reduce annual pilot costs by about 15%, or some E150m euros, Spohr said.<br/>