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Last Updated:  Thursday, 20 March, 2003, 11:38 GMT
Lufthansa warns of war cost
Lufthansa tail fins
Lufthansa says war postpones recovery
German flag carrier Lufthansa has warned that war on Iraq could prolong the troubles the airline industry has faced since the 11 September suicide hijackings.

"The end is not in sight," said Lufthansa chief executive Juergen Weber, adding that the industry's crisis "will be extended through the war that started in the middle of the night".

He also repeated a warning that Lufthansa expects lower revenues in 2003 than last year.

Since 11 September, airlines worldwide have grappled first with a huge slump in passenger numbers then with rising oil prices.

Lufthansa cancelled flights to three Middle East destinations - Kuwait, Amman and Tel Aviv - after US-led forces began their military attack on Iraq early on Thursday morning.

Signs of improvement

Lufthansa said it was unable to forecast its earnings for 2003, beyond saying that they would be less than last year.

Lufthansa has begun to recover from the aftermath of 11 September, reversing steep losses of 633m euros in 2001. The carrier posted 2002 net profit of 717m euros.

Mr Weber said on Thursday that staff flexibility on pay and working time has enabled the airline to avoid job cuts.

Lufthansa is struggling to compete with a growing budget airline sector in Germany, said Kieron Daly, an aviation analyst with Air Transport Intelligence.

Low cost rivals

"Lufthansa has been criticised somewhat by investors for going into denial over this," said Mr Daly.

"It's still not absolutely clear that Lufthansa is able to respond agilely enough to deal with this threat," he told the BBC's World Service.

Lufthansa reported that traffic revenue in 2002 fell 1.8% compared with the previous year to 12bn euros ($12.7bn; 8bn), while total revenue in 2002 came in at 17bn euros.

Operating profits improved in 2002 to 718m euros, but Lufthansa drew attention to a decline in the final three months of the year.

Lufthansa said it had trimmed its debts by the end of 2002 to 1.1bn euros ($1.7bn), compared with $3.8bn a year earlier, and that it was seeing a stronger cash flow.

Lufthansa's shares rose 2.9% on Thursday morning in Frankfurt as investors continued to see the stock as a relatively solid option.

Kieron Daly, Air Transport Intelligence
Lufthansa "is quite badly exposed on the North Atlantic...which has suffered extremely badly"

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