Lufthansa Group turned in a net profit of €1.78 billion ($1.90 billion) in 2016, up 4.6% on the previous year’s figure of €1.70 billion, the Germany-based organization said March 16. It achieved the profit on turnover down 1.2% at €31.6 billion.

“In a very demanding market environment we successfully kept the Lufthansa Group’s margins at their record prior-year levels, through consistent capacity and steering measures and, above all, through our effective cost reductions,” chairman of the executive board and CEO of Deutsche Lufthansa Carsten Spohr said.

“All our business segments developed positively in their respective markets. And by expanding our commercial joint ventures for the network airlines, fully acquiring Brussels Airlines and concluding the comprehensive wet-lease agreement with airberlin we have also strengthened our strategic position.”

He cautioned, however, that further cost reductions would be necessary in 2017: “This is the only way to meet and master the decline in unit revenues and higher fuel expenses.”

Among cost-saving measures introduced in 2016 was a move to a new pension system that added €652 million to the EBIT figure.

“The change in the pension system for our cabin crews, which we now also agreed with our cockpit crews, has had a sustainable positive effect, strengthening our balance sheet and making us less dependent on volatile interest rate developments,” Deutsche Lufthansa CFO Ulrik Svensson said. “This shows how important it is to have viable and forward-looking collective labor agreements.”

Among debits on the balance sheet for the past year was €100 million in strike costs.

Net profit figures for the individual components of the Group were not given, but Lufthansa Passenger Airlines raised its adjusted EBIT by €254 million to over €1.1 billion. Austrian Airlines was also in the black with an adjusted EBIT of €58 million, a €6 million improvement on 2015.

SWISS remained the Group’s most profitable airline with an adjusted EBIT margin of 9.3% and an adjusted EBIT of SFr429 million ($430 million) compared to SFr453 million last time. Low-cost carrier Eurowings reported an adjusted EBIT of €-91 million. More than half of that deficit could be attributed to startup costs and other non-recurring expenditures, the Group said.

Also in the red was Lufthansa Cargo, which recorded a €50 million loss for the year. The sharp €124 million decline compared to its 2015 result was largely because of significant falls in price levels, particularly in the face of massive overcapacity in the freight sector.

On the ground, Lufthansa Technik reported an adjusted EBIT of €411 million for 2016 (down €43 million on 2015), while caterer LSG achieved an adjusted EBIT of €104 million (up €5 million).

In 2017 the Group’s passenger airlines are expected to record organic capacity growth of 4.5% for its passenger airlines. Brussels Airlines, whose results will be fully consolidated for the first time in 2017, and the wet-leased flights of airberlin, should make a small positive contribution to earnings in their first year.

Alan Dron