The ratings on Germany-based aviation group Deutsche Lufthansa AG reflect its strong market positions, its demonstrated ability to generate positive free operating cash flow in an unfavorable trading environment, and healthy balance sheet structure. The ratings are constrained by the industry's cyclicality and fragile yield and volume environment. Lufthansa reported debt of €3.5 billion ($4.1 billion) and provisions for postretirement liabilities of €4.2 billion, at June 30, 2003. Lufthansa is Europe's third-largest airline in terms of passenger traffic, the world's second-largest carrier in air freight transport, and the world's leading civil aircraft maintenance and in-flight catering provider. Lufthansa generates approximately 60% of its revenues from its passenger airline activities, which are recovering from subdued levels. The implementation of further capacity-
