Lufthansa cautious for year ahead after record 2016

German airline group Lufthansa said Thursday it achieved a record net profit in 2016, but offered only modest forecasts for the current year, squeezed between falling prices and higher costs.

The Frankfurt-based firm reported net profit of 1.78 billion euros ($1.9 billion) for last year in a statement, a 4.6-percent increase on 2015's figure and in line with its own and analysts' expectations.

"In a very demanding market environment, we successfully kept the Lufthansa Group's margins at their record prior-year levels," chief executive Carsten Spohr said at a Munich press conference.

Spohr pointed to a successful cost-cutting programme as one of the main factors supporting the group's performance.

And a pay and pensions deal executives struck with cabin crew made up a large share of 2016's profit, adding some 650 million euros to Lufthansa's bottom line.

Lower fuel costs during 2016, relating to a trough in oil prices towards the start of the year, also lent the group a tailwind visible in its profits.

- Between two fires -

That lift now belongs to the past, with Lufthansa expecting to be squeezed in 2017 as intense competition drives down airline ticket prices, while more expensive oil pushes fuel costs back skywards.

The group will have to "further reduce our costs," Spohr said, warning that he expects underlying, or operating profits to come in "slightly lower" this year than last.

At 31.7 billion euros, Lufthansa's revenues in 2016 remained at around the same level as the previous year, when it brought in 32.1 billion.

Adjusting for the one-off effect of the cabin crew deal showed operating profit at 1.75 billion euros, a decrease of 3.6 percent on 2015's figure and slightly shy of the firm's 1.8-billion-euro forecast.

But there are bright spots in the future outlook as well, with Lufthansa hoping the full integration of Brussels Airlines, which it bought at the end of 2016, and a deal to lease 38 aircraft from struggling German competitor Air Berlin will make a "positive contribution to the results".

- Peace in the skies -

Spohr also believes that the end of a long-simmering battle with pilots over pay and pensions -- with a provisional deal struck on Wednesday this week -- will perk up performance for the airline.

The five-year wage agreement will slash pensions costs and bring "savings of 150 million euros a year," Lufthansa finance director Ulrik Svensson said.

"It's a great joy for us that this conflict is finally at an end," Spohr added.

Multiple walkouts by pilots belonging to union Cockpit cost Lufthansa 351 million euros in 2014 and 2015, while a fresh wave of industrial action in November 2016 alone cost 100 million euros.

Investors in Frankfurt bought up shares in Lufthansa in the wake of the on-target results, shooting the firm to the top of the Dax index of leading German companies.

The stock was up 5.17 percent at 1310 GMT to trade at 15.16 euros.

Lufthansa plans to offer shareholders a dividend of 50 euro cents per share, the same level as last year's payout.

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