BERLIN German airline Lufthansa expects its fuel bill to fall by 13 percent in 2015 because of lower oil prices, setting it on course for higher profit this year and boosting its shares.
Airlines hedge jet fuel purchases as a way to give them greater control over spending on an item that typically accounts for around a third of their cost base, meaning it takes time for them to gain the benefits of the 50 percent plunge in oil prices since last June.
Lufthansa estimated a 2015 fuel bill of 5.8 billion euros ($6.9 billion) against 6.7 billion in 2014. Its assumptions for 2015 were based on a price for Brent crude oil of $68 a barrel.
Brent crude is at its lowest level since April 2009 and dropped below $49 a barrel on Monday. Goldman Sachs also slashed its oil price forecasts.
The oil price slump has boosted airline stocks, with Lufthansa climbing 30 percent in the last three months, against a 43 percent rise for British Airways owner IAG, and a 25 percent gain for Air France-KLM.
Lufthansa shares rose another 2.6 percent on Monday, among the top gainers in Europe.
The airline is currently 73 percent hedged for 2015, against 79 percent for 2014, it said in a slideshow presentation.
It also confirmed forecasts for 2014 operating profit of around 1 billion euros, with 2015 earnings to be significantly above that, as previously stated.
However, Lufthansa said the lower cost of jet fuel could lead to revenue uncertainty as it may encourage airlines to add more flight capacity, which would put pressure on ticket prices.
Lufthansa faces particular competition on European routes from low-cost carriers Ryanair, easyJet and Vueling and predicts its yield, a measure of pricing per passenger, will fall further in 2015.
Citi analyst Andrew Light said in a note the unchanged profit forecast implied Lufthansa's revenue yields for passenger and cargo operations would fall by around 4.5 percent in 2015.
John Strickland, director at JLS Consulting, said airlines didn't seem to be rushing to add more capacity this time in light of lower fuel prices.
"Airlines have learned their lessons," he told Reuters, adding that Lufthansa itself had been one of those adding too much capacity in the past, such as on North America routes last year.
Lufthansa also said its new low-cost long-haul business, based in Cologne and flying under the Eurowings brand, will be launched on October 15.
(Editing by Keith Weir)