Lufthansa expects profits to fall only slightly this year despite lower fares and a rising fuel bill, the German airline said today.
This comes after it clinched a long-sought deal on pay and pensions with its pilots this week.
Like its rivals, Lufthansa saw ticket prices come under pressure in Europe last year from overcapacity and fierce competition from airlines with a lower cost base.
While it expects the decline in ticket revenue to ease this year, the company said it would not be able to cut costs enough to make up for that and an increase in its fuel bill of about €350m to €5.2 billion.
However, it forecast that adjusted earnings before interest and tax will be only slightly lower this year than the €1.75 billion reported for 2016.
This was better than had been expected by analysts and sent its share price more than 4% this morning.
Before the results, analysts had expected its underlying profit to fall more sharply to €1.38 billion for 2017.
"We feel well equipped to be successful in 2017 in a continuing challenging environment," the company's chief executive Carsten Spohr told analysts.
Lufthansa's chief financial officer Ulrik Svensson said the year had started well for the company, with increasing traffic, the agreement with the pilots and unit revenues even improving in Asia compared with last year.
The deal on pay and pensions with pilots is expected to reduce pilot costs by about 15%, Spohr said.
Under the deal pilots will effectively work more hours, thereby increasing productivity, and the average retirement age will also rise, cutting pension costs.
But Svensson said revenues were still under pressure in Europe, after the group reported results for 2016 in line with expectations.
Many analysts have expressed concern that European airlines are engaging in a damaging battle for market share, putting more seats onto the market than there is demand for, which will lead to lower profits this year.
Lufthansa has said it will increase capacity by 12% this year. Of that, 8% is thanks to the takeover of Brussels Airlines and a deal to lease 38 planes and crew from Germany's Air Berlin.
Lufthansa reduced unit costs, not including fuel or currency, by 2.5% last year and is targeting a similar reduction for this year.
The deal with the pilots, which still requires some details to be negotiated, is not yet reflected in its forecasts, Svensson said.
