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 high-risk and cyclical nature of the airline industry, aggressive competition from low-cost carriers within a decentralized home market, and potential volatility of fuel prices that could constrain profitability levels in the air passenger business. Lufthansa reported total debt of about €3.0 billion and provisions for postretirement liabilities of €3.8 billion at Dec. 31, 2006. Lufthansa is Europe's second-largest airline in terms of passenger traffic, and benefits from a strong connecting network through its membership of the Star Alliance international airline group. The Lufthansa group derives about 80% of revenues from its passenger airline and
