The ratings on Germany-based aviation group Deutsche Lufthansa AG reflect its predominant market positions, strong liquidity, and healthy balance sheet structure. The ratings are constrained by the group's loss-making catering business, however, and the likelihood that profitability levels in the air-passenger business will take longer to recover to historic levels than envisaged due primarily to increasing fuel prices and strong competition, particularly on short-haul routes. Lufthansa reported total debt of €3.5 billion ($4.3 billion) and provisions for postretirement liabilities of €4.5 billion at June 30, 2004. Lufthansa is Europe's third-largest airline in terms of passenger traffic and benefits from its membership of the Star Alliance, which holds a market-leading share of about 27% of global revenue passenger kilometres (RPKs). The
