Lufthansa shares plunge as airline misses expectations

Lufthansa released forecasts of slightly higher profits in 2016, with cut-price competitors and falling average prices negating the effect of lower fuel prices.

On Thursday, the German airline group restored dividends to its shareholders, planning to return 50 euro cents per share to investors, as a result of the lower oil prices seen through 2015.

But the group said its low cost Europe rivals - namely easyJet and Ryanair - had equally benefited from the low cost of fuel, and were mounting significant challenges to Lufthansa's low cost arm Eurowings.

Lufthansa reported adjusted EBIT of €1.82bn (£1.43bn) in 2015, and said it expected a slight increase in profit for 2016. But it also signalled a significant decline in yields - revenue per passenger mile - as a result of the long-haul expansion of Eurowings.

"We remain concerned the group is struggling to deal with multiple strategic challenges, with cheaper fuel masking the problems in the short term," wrote Liberum analyst Gerald Khoo.

Liberum maintained a 'sell' rating on the stock.

Lufthansa was also struggling to conclude bargaining over new pay and pension deals with its staff. Both pilots and cabin crew went on strike in 2015.

According to Reuters, analysts were picking an increase in profit to €2.08bn before the release on Thursday.

At 1215 GMT, shares in the airline group were down 6.98% to €14.47.