In 2017, German airline Lufthansa reported stronger free cash flows and lower adjusted debt than we expected, despite its asset deal to acquire or lease-in 65 planes from the insolvent Air Berlin. We believe Lufthansa's solid EBITDA performance will likely continue in 2018-2019, with traffic growth and nonfuel cost-savings largely offsetting pressure from rising fuel costs, allowing ample financial flexibility for external growth. We are revising our outlook on Lufthansa to positive from stable, and affirming our 'BBB-/A-3' ratings. The positive outlook reflects that we may upgrade Lufthansa in the next 12 months if we believe the company can maintain adjusted funds from operations to debt in excess of 30%, underpinned by a prudent financial policy consistent with a higher
