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 poor performance of the group's catering and leisure operations, together with the additional challenge of acquiring and integrating loss-making carrier Swiss International Airlines AG (Swiss) at a time when increasing fuel prices and strong competition are likely to place increasing pressure on profitability levels in the air passenger business. Lufthansa reported total debt of about €3.6 billion and provisions for postretirement liabilities of €4.0 billion at June 30, 2005. Lufthansa is Europe's second-largest airline in terms of passenger traffic, and benefits from its membership of the Star Alliance, which holds a market-leading share
