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, however, by the challenging trading environment, typified by rising fuel prices and strong competition, and the structural difficulties faced by the group in returning its U.S. catering operation to profitability. In addition, the group's creditworthiness is pressured by ongoing integration of the loss-making carrier Swiss International Airlines AG (Swiss). At Sept. 30, 2005, Lufthansa reported total debt of €3.5 billion and provisions for postretirement liabilities of about €4.1 billion. Lufthansa is Europe's second-largest airline in terms of passenger traffic and derives about 80% of revenues from its passenger airline and cargo transport activities. It operates
