AF Air FranceKLM

LONDON—German airline Deutsche Lufthansa AG late Wednesday raised its full-year earnings forecast, backtracking partially on a profit warning issued only three months ago.

Adjusted earnings before interest and taxes this year are expected to be roughly on part with last year's 1.8 billion-euro ($2 billion) level, Germany's largest airline said. Lufthansa credited better-than-expected short-term business travel bookings in September.

The reversal punctuates the high level of volatility European airlines are trying to manage.

The revised outlook remains below the projection Lufthansa had given earlier in the year, when it promised investors a slight improvement in earnings this year. But in July, after terrorist attacks in Europe spooked travelers, Lufthansa warned profit could fall below 2015's level.

European airlines have issued a flurry of profit warnings in recent months amid an unusually challenging time for the industry. Overcapacity has driven down ticket prices, terror attacks have weighed on demand and repeated air-traffic-control strikes have led to thousands of flight cancellations.

Britain's vote to leave the European Union has created further turmoil, causing a slump in the British currency that has weighed on airlines serving the U.K. Ryanair Holdings PLC, Europe's biggest discount airline, on Tuesday said its profit in the fiscal year ending March 31, 2017, would advance more slowly than expected.

British Airways parent International Consolidated Airlines Group SA and Air France-KLM SA are among other European carriers to issue profit warnings in the past four months.

Lufthansa said measures it took to reduce capacity as well as other adjustments have been successful. Still, it cautioned "political and economic uncertainties continue to significantly burden long-term bookings, especially on long-haul routes to Europe." Projecting short-term bookings remained difficult, it said, would could spur "significant volatility in earnings going forward."

Lufthansa said sales in the January through September period fell slightly to €23.9 billion from €24.3 billion in the year-prior period. The carrier generated adjusted earnings of €1.7 billion, or €16 million below the prior-year level. Earnings at the core passenger airline unit rose 4% to €1.4 billion.

Earnings have benefited from a €798 million drop in the airline's fuel bill in the nine months compared with the same prior-year period.

Write to Robert Wall at robert.wall@wsj.com

(END) Dow Jones Newswires

October 19, 2016 14:35 ET (18:35 GMT)

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