The firm said on Wednesday it was cutting the book value of
Steel Americas, which comprises a mill in Brazil and another in
the United States, to 3.4 billion euros ($4.4 billion) from 3.9
billion, which analysts said showed it was ready to accept a
lower price and could be nearing a long-anticipated deal.

“The precise figure of 683 million euros (for the writedown)
indicates that the deal is imminent,” analyst Heino Ruland of
Ruland Research said.

At 0820 GMT, ThyssenKrupp shares were up 4 percent at 15.715
euros, among the biggest rises by a European blue-chip stock
.

Steel Americas has been a thorn in ThyssenKrupp’s side for
years, as the project cost more than expected to set up and then
racked up losses as steel prices and demand were weakened by a
faltering global economy.

Sources familiar with the matter have told Reuters that
ThyssenKrupp was in talks with Brazilian steelmaker CSN
, as well as a consortium of ArcelorMittal,
the world’s biggest steelmaker, and Japan’s Nippon Steel
over a potential sale of Steel Americas.

Both sets of bidders have offered more than $3 billion, but
less than the book value at the time. U.S. Steel and Nucor
have put in bids just for the U.S. mill, the sources
added.

A sale of Steel Americas at even the lowered book value
would be a “great result”, Davy analyst Tim Cahill said, “given
that the market is factoring in 2.0-2.5 billion euros”.

UNDER PRESSURE

ThyssenKrupp Chief Executive Heinrich Hiesinger has been
trying to offload the mills as he shifts investments to
higher-margin products and services, such as elevators,
submarines and parts for manufacturing plants.

The writedown pushed ThyssenKrupp to an unexpected net loss
of 656 million euros for the fiscal second quarter through the
end of March. Analysts had on average expected a profit of 25.5
million euros.

Even excluding Steel Americas and other units up for sale,
ThyssenKrupp remained in the red, posting a net loss that
narrowed to 89 million from 164 million euros.

The operating margin of its continuing businesses shrank to
zero from 3 percent a year earlier on a slump in steel prices,
weak demand for car and wind turbine components and provisions
it set aside to cover fines and claims related to a rail cartel.

ThyssenKrupp is nearing the end of a push to sell assets
with a total of 10 billion euros in annual revenue, and is also
cutting costs and changing management structures in an attempt
to return the company to growth and pay down debt.

It said on Wednesday that it would cut 3,000 of 15,000
administrative jobs as part of its savings plan.

But CEO Hiesinger still faces an uphill battle as the global
economy remains weak and after a series of setbacks and scandals
caused him to axe half his management board late last year.

ThyssenKrupp warned on Wednesday it no longer expected sales
to remain stable at about 40 billion euros in its fiscal year
ending in September, following an 11 percent drop in quarterly
revenue from continuing businesses.

It still expects adjusted operating profit from those
businesses to decline to about 1 billion euros from 1.4 billion.

ArcelorMittal posted a smaller-than-expected 26 percent drop
in first-quarter core earnings last week, cushioned by cost
cutting.

($1 = 0.7705 euros)

(Additional reporting by Hakan Ersen; Editing by Harro ten
Wolde and Mark Potter)

Siemens, which makes products ranging from fast trains and
gas turbines to hearing aids, is heavily exposed to world
industrial demand and has been hit by a downturn in investment
due to the global economic slowdown.

Manufacturing studies published last month had already
fanned concern that the global economy is losing steam, as
growth in Chinese factories slowed to a crawl, reflecting weak
demand from a fragile U.S. economy and a euro zone mired in
recession.

The engineering group said on Thursday it now expected net
profit from continuing operations to reach the lower end of its
outlook range of between 4.5 billion euros ($5.9 billion) and 5
billion in the current year.

Analysts in a Reuters poll had on average seen profit for
the group’s financial year through September declining to 4.84
billion euros from 5.18 billion last year, partly because of a 1
billion hit from its cost-cutting programme.

Siemens Chief Executive Peter Loescher has been criticised
for being too slow to react to a downturn in the global economy
and is now struggling to get the company back on track to
compete with rivals such as General Electric Co.

He put on the back burner a plan to increase annual sales by
about a third to 100 billion euros and late last year launched a
push to save 6 billion euros over two years.

Siemens aims to push up the margin on its core operating
profit to at least 12 percent from 9.5 percent last year by
cutting costs and focusing on its most profitable businesses.

By comparison, GE posted an operating margin of 15.1 percent
last year and aims to further boost profitability this year.
Switzerland’s ABB Ltd, a major competitor to Siemens
in power systems and industry automation, had a margin of 15.0
percent in its fiscal first quarter.

In its second quarter through March, Siemens saw its margin
shrink to 7.5 percent from 9.9 percent as demand faded for
higher-margin industry automation and drive-technology products.

Quarterly revenue slipped 7 percent, more than expected, on
weak industry sales, and net profit stagnated.

And even though industrial orders from Germany and China
were particularly weak in the second quarter, group orders – an
indicator for future sales – returned to growth following six
quarters of declines. They jumped 20 percent to 21.45 billion
euros, beating a consensus for 18.92 billion, thanks to major
orders from Europe and the Americas.

In its full year, Siemens sees orders growing moderately but
now expects revenue to decline from last year. Its shares traded
down 1.2 percent at 78.39 euros by 0712 GMT.

At the current density of debris, there will be an in-orbit collision about every five years, however research presented at a conference hosted by ESA in Germany showed that an increase in such junk made more collisions likely in the future.

Five to 10 large objects need to be collected from space a year to help cut down on smashes and stem the risk of fragments being sprayed into space that could cause more damage, it said.

Scientists estimate there are about 29,000 objects larger than 10 cm (4 inches) orbiting Earth at average speeds of 25,000 kph (15,500 mph) – about 40 times faster than airplanes travel.

At that speed, even small pieces of fast-travelling debris can damage or destroy spacecraft and satellites – which could cost billions of dollars to replace and disrupt mobile phone communication or satellite navigation.

“Within a few decades, there are going to be collisions among large objects that will create fragments that can do further damage,” Heiner Klinkrad, the head of ESA’s Space Debris Office, told Reuters.

“The only way to keep this from happening is to go up there and remove them,” he said. “The longer you wait, the more difficult and far more expensive it is going to be.”

Space debris includes any man-made litter left in space – parts of rocket launchers, inactive satellites and broken parts from past collisions.

Space agencies around the world are cooperating on space debris research, and ESA’s Clean Space initiative, launched in 2012, aims to develop the technology to safely capture and remove space debris.

Researchers are looking at several different methods for removing space debris from orbit, Klinkrad said, ranging from the use of propulsion packages, conductive tethers or lasers, to nets and harpoons.

But any decision to go ahead with a mission, as well as funds to pay for it, would need to come ESA’s 20 member states, which include France, Germany, Italy and Britain.

Demand for the removal of objects from orbit could eventually offer opportunities for private companies, Klinkrad said, though many issues, including legal ones, surrounding space debris would need to be settled first.

($1 = 0.7695 euros)

(Editing by Alison Williams)

Lufthansa offered to raise salaries by 1.2 percent from
October this year and a further 0.5 percent a year later, in a
deal that would run for 29 months and would not contain job
guarantees, a spokeswoman for Verdi said on Wednesday.

“We will discuss the offer tomorrow and possibly decide …
if we’re going on strike again,” she said, noting passengers
would be informed in due course if the union was calling further
stoppages.

Lufthansa said it had offered to raise salaries in two steps
in a deal that would last from February this year to June 2015,
giving total increases of between 1.7 percent and 2.3 percent
depending on the division an employee worked in, said a
spokeswoman, declining to give more details.

Staff have already held a one-day strike on March 21,
forcing Lufthansa to cancel nearly 40 percent of its flights for
the day.

Efforts by big European airlines such as Lufthansa and Air
France-KLM to cut costs – in the face of soaring jet
fuel prices and fierce competition from Middle Eastern airlines
and low-cost carriers – have fanned tensions with workers.

Verdi is demanding a 5.2 percent pay rise for 33,000 cabin
crew and ground staff at Lufthansa Cargo, Lufthansa Technik,
Lufthansa Systems, catering unit LSG Sky Chefs and ground crews.
It also wants a commitment by Lufthansa to safeguard jobs.

Lufthansa, Europe’s biggest airline by revenue, wants to
freeze pay and get staff to work an hour more each week to help
it remain competitive.

The airline is cutting 3,500 jobs, revamping low-cost
carrier Germanwings and bundling procurement for its airlines as
it seeks to cut costs and improve earnings.

Last year it agreed to a mediated deal to raise cabin crew
pay almost 4 percent, adding 33 million euros to costs, after a
series of strikes forced it to cancel more than 1,000 flights.

Staff costs accounted for just over a fifth of its overall
operating expenses last year. That compares with a 30 percent
share at Air France, but budget carriers such as Ryanair
and easyJet have a much lower cost base.

The comparable figure for the latter two is closer to 10
percent, allowing them to undercut “legacy” or
longer-established carriers on fares.

Coming on the heels of figures showing a
stronger-than-expected rise in industrial orders in February,
Economy Ministry data on Monday showed output edging up 0.5
percent on the month. This was above the mid-range forecast in a
Reuters poll of economists for a 0.3 percent rise.

But industrial output still fell 0.2 percent in the first
two months of the year due to a downwardly revised drop in
production of 0.6 percent in January. Output last month was
originally reported unchanged.

Leaders of industry groups at a conference in the northern
city of Hanover said the economy was already rebounding after
shrinking in the fourth quarter of 2012 and would accelerate in
the second half of this year.

“We see good chances that the economy will pick up steam in
the course of the year,” said Ulrich Grillo, the head of the BDI
industry lobby group, predicting growth of up to 0.8 percent.

Germany’s economy, long resilient to the euro zone crisis,
slowed in 2012 and output shrank by 0.6 percent in the final
quarter. But economists expect it to avoid recession and to have
returned to weak growth in the first three months of 2013.

German growth is crucial for stimulating the economy of the
broader single currency bloc, struggling with a debt crisis and
mired in recession. The government is predicting an expansion of
just 0.4 percent this year.

Monday’s data showed a rise in German production of capital
goods and energy in February outweighing a sharp drop in
construction, which was partly due to construction.

“Production is stabilising once again after the sharp
decline at the end of last year,” said Unicredit analyst
Alexander Koch. “Given that retail sales is also rising and
investments are stabilising, we expect a return to economic
growth in the first quarter.”

Unicredit’s Koch said the increase in orders and production
of capital goods such as machinery was especially positive news
for Germany’s economy, which he sees growing 0.3 percent in the
first quarter, as it spelled out a rebound in investment.

Manufacturing output increased by 0.5 percent as a 2.4
percent rise in capital goods such as machinery outweighed
decreases in consumer and intermediate goods, the data showed.

Figures last week had shown domestic orders for capital
goods jumping 4.4 percent, which the Economy Ministry said set
the stage for a revival in investments. Industry orders rose 2.3
percent overall in February.

The BDI said a pickup in investments, which had been in
contraction for five quarters, was crucial for economic recovery
this year, while the steel lobby said the biggest risk remained
the euro zone crisis.

The problems with Cyprus had already weighed on German
business sentiment, which dropped in March, and worries over
Italy could dampen morale in the long-term, the head of the
steel lobby, Hans Juergen Kerkhoff, said.

“Without a return of confidence there will be no rebound in
capital goods and therefore also not in the outlook for the
steel industry,” he said, reiterating his association’s estimate
for steel output to rise miminimally to 43 million tonnes this
year, still well below levels of five years ago.

CAUTION PREVAILS

With federal elections looming in September, the BDI’s Grillo
warned against some of the centre-left opposition’s policy
proposals such as raising inheritance tax or introducing a
wealth tax, which he said would weigh on the industrial sector.

The VDMA and ZVEI trade bodies for the engineering sector
and the electrical goods industry said they had seen a moderate
pickup in business this year.

“New orders have picked up again, so there is an upward
trend. But it is not so dynamic that we are becoming overly
optimistic,” said Ralph Wiechers, the VDMA’s chief economist.

“Two percent (engineering output growth) are do-able this
year, but we will need some more tailwind from the economy, from
indicators and global markets.”

Exceptionally harsh winter weather prevented Germany’s
industrial sector from rebounding strongly this quarter,
economists said. Production in the construction sector dropped
2.7 percent, according to Monday’s data.

“The harsh winter weather has not only affected the
construction sector but the entire industry,” ING analyst
Carsten Brzeski said. “Interestingly, the German economy has
been hit much harder by the winter weather than the rest of the
euro zone. Some might consider this a meteorological-inflicted
rebalancing.”

Brzeski said this explained the divergence this year between
weak economic data and optimistic sentiment surveys. Recent
polls have shown consumer morale holding steady going into
April, and investor sentiment edging up.

Monday’s output data also showed energy production jumping
in February, by 3.9 percent. Figures last week showed Germany
exported more electricity last year than it imported, dispelling
fears about possible power shortages due to its transition from
nuclear to renewable energy.

Putin’s visit to Germany and the Netherlands, Moscow’s
biggest trade partners in Europe, was supposed to focus on trade
but comes at awkward time just weeks after a wave of state
inspections of foreign-funded non-governmental organisations
(NGOs) in Russia, much criticised abroad.

In her address at the opening of an industrial fair
spotlighting Russian business, Merkel told Putin Russia was
propped by its raw material deposits and huge investment in
infrastructure but Germany could help it in its aims to innovate
and diversify.

“We believe this can happen most successfully when there is
an active civil society,” she said.

“We must intensify these discussion, develop our ideas, and
we must give the NGOs, who we know as a motor for innovation, a
good chance in Russia,” she added to strong applause.

Germany and the Netherlands need Russia for energy and as a
market for exports ranging from Volkswagen Touaregs to tulips,
but are uneasy about the influence its oil and gas give it and
about Putin’s treatment of opponents and activists in his new
Kremlin term.

Merkel had come under pressure at home to voice her
concerns to Putin, not only on the inspections of NGOs, but also
on their differences over Syria’s civil war and Russian
criticism of the German-orchestrated financial bailout of
Cyprus. Her talks with Putin would include “controversial
subjects” she told reporters on the sidelines of the fair.

In his address to the trade fair Putin focused on Russia’s
economic strength, noting, “despite global disarray and the
global financial crisis, our country has continued to develop
positively.”

Outside hundreds of protesters gathered, many carrying
Syrian flags, others wearing devil masks or waving images of
Putin dressed in a prisoner’s stripped uniform. “Stop political
terror,” read one banner.

In an earlier interview with German broadcaster ARD, Putin
had dismissed criticism of the NGO inspections and said they
would not cast a shadow over the visit, echoing his repeated
rejection of Western worries about his domestic policies.

Putin – a former Soviet KGB officer who was stationed in
East Germany, where Merkel grew up – has accused Western states
of using NGOs to spy on Russia and influence politics.

He said in the interview that Russians have a right to know
which NGOs are foreign-funded “and for what purposes”.

He sent warmer signals on economic issues, expressing
confidence in the euro and toning down criticism of the Cyprus
bailout by saying he hoped more money would flow into Russia as
a result.

This month, after more than a year of looking, they settled
on the U.S. state of Texas, after a boom in the production of
natural gas from shale extraction brought gas prices down to
just a quarter of what companies paid in Europe.

“In the USA, re-industrialisation is being promoted very
consistently, ambitiously and with great conviction,” Eder told
Reuters. “Low energy prices gave us the final – and not
insignificant – push.”

With cheap shale gas making the United States a magnet for
industrial companies like Voestalpine, many economists are
positing a return to industrialisation for the world’s biggest
economy after more than a decade of consumption-led growth.

“America is currently seeing a renaissance of production,”
said Felix Schuler, a partner at Boston Consulting Group (BCG)
based in Germany who specialises in the industrial goods sector.

U.S. natural gas prices are $4 per million British thermal
units – having touched a decade low of $2 last year – well below
its 10-year average of about $5.70 and prices of around $14 in
Britain and almost $17 in Asia.

Voestalpine will use natural gas at its new plant, its
biggest investment to date at 550 million euros ($712 million),
to turn iron ore into sponge iron, which will later be used to
make crude steel.

Cheap natural gas not only cuts costs for companies that use
it as a raw material or feedstock for other products such as
chemicals, it also means lower power prices as utilities use
more gas to generate electricity.

Industrial companies pay about $40 per megawatt-hour of
electricity on the U.S. East Coast, where prices have dropped
sharply since mid-2008. That compares with about 45 euros ($58)
in Germany, 60 euros in Austria and more than 65 pounds ($98) in
Britain, creating incentives for energy-hungry firms in the
steel and chemicals sectors to invest in new plants and expand
existing facilities in the United States.

“The idea that energy costs in North America would always be
more expensive no longer holds true. The new reality is that
natural gas has turned that equation on its head,” Peter
Loescher, the chief of executive of German engineering
conglomerate Siemens, said in Detroit last month.

SHALE REVOLUTION

The National Association of Manufacturers in the United
States estimates the shale boom will add 1 million manufacturing
jobs in the country by 2025 as long as natural gas price
increases remain moderate and industry regulation is favourable.

“I’ve spoken to several manufacturers from Europe and Asia
who are interested in the shale revolution,” said Chad Moutray,
the association’s chief economist.

Austrian fireproof materials maker RHI is also
mulling a new U.S. plant, while it cuts production capacity in
Europe due to lower levels of growth.

Tough targets designed to reduce greenhouse gas emissions in
Europe can also act as a push from the old continent.

RHI’s chief executive told journalists this month that the
idea the company could cut its energy use by 5 percent a year to
meet EU targets was “in the realm of fairy tales”.

“We set ourselves these challenges, but at some point one
must realise that European industry employs many people and
helps economic growth. What is the alternative? Shall we turn
Europe into a financial centre?” asked Franz Struzl.

U.S. manufacturing output was at its highest level since
mid-2008 in February, fuelled by a pickup in demand for cars and
homes as well as cheap energy. Manufacturers’ new orders – an
indicator for future revenues – rose 3 percent in 2012.

U.S. companies including General Electric and Boeing
are also starting to bring back home some of the jobs
they had moved abroad to cut costs, helped by the availability
of cheap shale gas. Apple said late last year it
planned to move some production of Macintosh computers to the
United States from China this year.

“Two years ago, it was uncertain whether the pick-up in the
United States was just a catch-up effect. But by now there is
significant confidence in the sector that this is not a flash in
the pan,” said Ulrich Ackermann, head of German engineering
association VDMA’s Foreign Trade department.

CHEAPER FEEDSTOCK

Lower energy and feedstock prices help narrow the production
cost gap with countries such as China to make exports more
competitive.

According to research and analysis firm IHS, a number of
large chemicals companies have announced plans to spend a total
of about $95 billion to build or expand facilities in North
America for exports, lured by cheap feedstock.

They are mainly in the production of ethylene, a basic
hydrocarbon used to make solvents, plastics and detergents.

South African petrochemicals group Sasol is
considering spending up to $7 billion on an ethane cracker
complex in the United States, Egypt’s Orascom Construction
Industries is building a $1.4 billion fertiliser plant
in Iowa, and Taiwan’s Formosa Plastics has expanded
plans for a new ethylene plant in Texas.

Japanese oil refiner Idemitsu Kosan and trading
house Mitsui & Co are looking into running a
petrochemical plant in the United States, which would export 30
percent of its production to Asia and Europe.

Austria’s Voestalpine aims to send half the annual output of
its new plant in Texas back to its mills in Austria and use the
rest as a strategic reserve.

U.S. President Barack Obama last month laid out a plan in
his State of the Union address to bring manufacturing jobs back
to the country, including a network of institutes that would
teach new industrial skills.

In last year’s address, he praised Germany’s Siemens for job
training efforts at its gas turbine plant in Charlotte, North
Carolina, opened in 2011.

The investment by Siemens, which has a total U.S. workforce
of about 60,000, is tapping booming demand for gas turbines as
the U.S. power industry switches to natural gas from coal.

German speciality chemicals company Wacker Chemie
has also cited government incentives such as infrastructure
grants and tax credits as key reasons for its decision to invest
$2 billion in a new polysilicon plant in Cleveland, Tennessee.

Voestalpine’s Eder said a secure energy supply, ease of
logistics and the availability of trained workers were important
in the company’s investment decision, but the fact that his
company was “welcomed with open arms” played a major role.

“We miss comparable efforts for industrial activities in
Europe,” Eder said.

The strike is expected to last for about five hours from 5am
(0400 GMT), the union said on Wednesday, setting the stage for
the next round of wage talks on Friday.

Efforts by big European airlines such as Lufthansa and Air
France-KLM to shrink costs in the face of soaring jet
fuel prices and fierce competition from Middle Eastern airlines
and low-cost carriers have fanned tensions with workers.

Strikes at Spanish airline Iberia, for instance,
caused thousands of flight cancellations at a cost of about 30
million euros ($38.7 million) until workers accepted a mediated
deal last week.

In negotiations that started last month, Germany’s Verdi is
demanding a 5.2 percent increase in wages for 12 months for
employees at Lufthansa Cargo, Lufthansa Technik, Lufthansa
Systems, catering unit LSG Sky Chefs and ground crews, as well
as a commitment by Lufthansa to safeguard jobs.

Lufthansa, Europe’s biggest airline by revenue, has said it
wants to freeze pay and ask employees to work one hour more each
week to help it to remain competitive in a tough market. Verdi
called that counter-demand a “provocation” and called on
Lufthansa to make a new offer.

Thursday’s strike will affect operations across Germany,
though Hamburg and the airline’s main hub in Frankfurt will be
most affected, the union said.

A list posted on the airline’s website on Wednesday
afternoon showed a total of 514 cancelled flights, mostly to
German and European destinations. Lufthansa said it aims to get
most intercontinental flights off the ground despite the strike.

Travellers in Germany have already suffered this year as
repeated strikes by airport security staff caused cancellations
and delays.

Strikes, capacity cuts by airlines and harsh winter weather
led to a 3.6 percent decline in passenger numbers at German
airports in January and February, the worst start to the year
since 2009, airports group ADV said on Wednesday.

Shares in Lufthansa were down 0.4 percent at 16.24 euros by
1442 GMT, while Germany’s blue-chip DAX index was up
0.5 percent.

ThyssenKrupp has struggled to reduce its debts with a flagging European economy hitting demand for steel, and has suffered massive losses from a project in the Americas.

The firm has reportedly shied away from raising money via a share issue because of opposition from its biggest investor, the Alfried Krupp von Bohlen und Halbach Foundation, which would see its 25.3 percent stake cut if it did not take part in the sale.

However, Germany’s Handelsblatt newspaper on Tuesday cited unidentified company sources as saying Chief Executive Heinrich Hiesinger had convinced the foundation’s 99-year-old patriarch, Berthold Beitz, to drop his opposition, and that a share sale could come this financial year, which ends in September.

A spokesman for ThyssenKrupp declined to comment, as did the foundation. As recently as January, the company said it did not need a capital increase.

At 1105 GMT, ThyssenKrupp shares were down 7.1 percent at 17.06 euros, the biggest drop by a European blue-chip stock .FTEU3.

BALANCE SHEET

Last year, ThyssenKrupp posted a 4.7-billion-euro loss due to a writedown on the value of its Steel Americas project. Net debt also climbed to 5.8 billion euros from 3.6 billion and the group’s equity capital shrank to 11.8 percent of its total assets, from 23.8 percent.

“Given the weak situation of the balance sheet a capital hike would make sense,” DZ Bank analyst Dirk Schlamp said, adding he expected further writedown on Steel Americas.

ThyssenKrupp’s supervisory board held an extraordinary meeting on Tuesday at which it elected former Henkel (HNKG_p.DE: Quote, Profile, Research, Stock Buzz) chief executive Ulrich Lehner as its new chairman, but there was no indication it discussed capital measures.

Lehner replaces Gerhard Cromme, whom Beitz ousted after he came under fire for not stopping the Steel Americas project when problems there started and for later putting all the blame on management.

“It was a shame, it was very painful,” Beitz told German newspaper Sueddeutsche Zeitung in an interview published this week. “I kept waking up at night and thought about it. But it had to be done. The good of the company comes first.”

Beitz also said he would “not block any step that is for the good of the company”, without being more specific.

($1 = 0.7717 euros)

(Editing by Chris Gallagher and Mark Potter)

European carriers including Lufthansa, Air France-KLM (AIRF.PA: Quote, Profile, Research, Stock Buzz) and British Airways (ICAG.L: Quote, Profile, Research, Stock Buzz) are slashing jobs and shelving growth plans as they grapple with soaring jet fuel prices, a weak economy and fierce competition from low-cost carriers and Middle East airlines.

Lufthansa is cutting 3,500 jobs, revamping low-cost carrier Germanwings and bundling procurement for its airlines. It hopes its restructuring program – dubbed SCORE – will help boost operating profit to 2.3 billion euros ($3 billion) in 2015, compared with 524 million last year.

“We should not get our expectations too high for 2013,” Chief Executive Christoph Franz said on Thursday as he presented full 2012 financial results. “Our 2013 result shall have to bear the burden of the restructuring and project costs.”

Excluding restructuring costs of 160 million euros, the revamp program’s hundreds of projects contributed 618 million euros to earnings in 2012. That figure will rise to 740 million euros this year, Lufthansa said.

The company’s shares were up 3.2 percent in early trading, outperforming a 0.9 percent rise in Germany’s DAX index.

SOARING FUEL BILL

Lufthansa reported last month its 2012 operating profit dropped 36 percent as the price of jet fuel rose and it spent money on its restructuring program.

Analysts on average see Lufthansa’s operating profit rising to 1.1 billion euros this year and to about 1.3 billion euros next year, according to Thomson Reuters data.

Fuel accounts for more than a fifth of Lufthansa’s operating costs, and its fuel bill rose almost 18 percent to 7.4 billion euros in 2012 from 6.3 billion a year earlier.

Lufthansa was the only major European legacy airline to posted a net profit for 2012, helped by a 623-million-euro gain from the sale of shares in Amadeus IT Holding.

Nonetheless, it scrapped its dividend for 2012, choosing instead to bolster its fleet and fund future restructuring, despite net profit that beat the most optimistic analyst forecasts.

Lufthansa said its supervisory board approved the purchase of 108 new aircraft on Wednesday. The aircraft with a total list price of 9 billion euros include two mammoth A380 jets for its main Lufthansa brand and six Boeing 777-300s for carrier SWISS.

Lufthansa said it saw net profit declining this year from 2012′s 990 million euros but did not provide a specific target. Analysts see net profit of 545 million euros this year.

(Editing by Victoria Bryan and Mark Potter)