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Lufthansa lifts 2016 profit target after strong September

* Says short-term business bookings better than expected in Sept

* Still cautious on longer-term long-haul bookings

* Shares (Berlin: DI6.BE - news) rise 8 percent, top Dax, European travel stocks (Adds shares, comment)

BERLIN, Oct (Shenzhen: 000069.SZ - news) 19 (Reuters) - German airline Lufthansa increased its profit target for the year after business bookings were better than expected last month, contrasting with downgrades from low-cost rivals and boosting its shares.

In an unscheduled trading update, Lufthansa said late on Wednesday it now expects 2016 adjusted earnings before interest and tax (EBIT) to be roughly on the same level as last year, when it made just over 1.8 billion euros ($2 billion). The airline had said in July that it expected earnings to drop.

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The increased target follows profit warnings this month from low-cost rivals Ryanair and easyJet, whose greater exposure to the leisure market and Britain make them more vulnerable to weakness in the pound.

Shares in Lufthansa jumped 8 percent to a three month-high of 11.32 euros by 0815 GMT on Thursday. The comments also boosted peers, notably Air France-KLM (LSE: 0LN7.L - news) , which like Lufthansa is less exposed to Britain than the big budget carriers.

Lufthansa Group, which also includes carriers Swiss, Austrian and Eurowings, had previously forecast lower profit after attacks in Europe deterred leisure travellers and weighed on bookings, especially on long-haul routes to Europe.

However, late bookings for September, especially from business customers, were better than expected, the carrier said, while its decision to cut back the number of seats it originally planned to offer this year paid off.

Adjusted EBIT for the first nine months of the year was stable at 1.68 billion euros.

Analysts cautioned Lufthansa still faced major cost challenges and a tough market.

Lufthansa is cutting costs to better compete with budget carriers and leaner Gulf rivals, prompting a series of strikes from crews.

Pressure on ticket prices looks set to remain, with Ryanair expecting average fares to fall as much as 15 percent. Budget rival Norwegian also on Thursday announced plans to expand long-haul flying.

Lufthansa itself cautioned that longer-term bookings for long-haul routes to Europe were still being affected by security concerns.

"Forecasting short-term bookings therefore remains challenging and may lead to significant volatility in earnings going forward," it said.

Liberum increased its price target for Lufthansa shares to 9.90 euros from 7.50 euros, but analyst Gerald Khoo said he didn't see the results as a turning point and still expected earnings to fall in 2017, keeping a "Sell" recommendation on the stock.

Lufthansa said it now expects revenues to fall 7-8 percent in the fourth quarter, against its previous estimate for an 8-9 percent drop. The airline is due to release full results on Nov. 2. ($1 = 0.9120 euros) (Reporting by Victoria Bryan; Editing by Susan Fenton and Keith Weir)