Deutsche Lufthansa AG  (DLAKY) led German stocks higher Thursday after Europe's second-largest airline posted stronger-than-expected full year earnings and sealed a labor agreement with striking pilots.

The German airline reported full-year revenue of €31.6 billion ($33.2 billion), down 1.2% but broadly in line with the Factset (FDS - Get Report) consensus, while earnings before interest and taxes (Ebit) rose 35% to €2.27 billion, considerably ahead of the consensus for €2.08 billion.

After adjusting for the unexpected costs of changes to labor agreements on pay and lost revenues stemming from strike action, Ebit came in at €1.75 billion against forecasts for €1.79 billion, modestly below consensus.

Earnings per share were also significantly higher, at €3.81, against market expectations of €3.20, and the group said it would pay a dividend of €0.50 per share.

Lufthansa stock jumped by 3.6% after the opening bell in Europe, to trade at €14.97, far outstripping the 0.17% gain for the Stoxx Europe 600 TMI Airlines index and the 0.83% advance for the DAX performance index.

"We are again in a stronger position today than we were a year ago," said CEO Carsten Spohr. "And once again we were able to convince our customers of the quality and the appeal of our products and services.".

Thursday's beat came despite a year of industrial action that saw the airline record a €100 million charge relating to multiple walkouts by pilots within its own ranks and ground crews at Berlin airport, a major hub for the airline.

Lufthansa agreed a new deal on pay and pensions with its pilots on Wednesday as part of an effort stave off further industrial action.

Much like its industry compatriots, Lufthansa has also battled against rising fuel costs and falling unit revenues, which have been brought about by increasing seat capacity across the industry and a tough market for tourism across Europe, over the last year or more.

"In 2017 it remains necessary to further reduce our costs. This is the only way to meet and master the decline in unit revenues and the higher fuel expenses, and at the same time to maintain and strengthen our financial stability and our investment capacities," Spohr said.