The ratings on Germany-based aviation group Deutsche Lufthansa AG (Lufthansa) reflect Standard and Poor's Ratings Services' opinion of its strong market positions, the diversity in its operations, its good exposure to high-yield premium traffic, and its strong liquidity position. We consider that these strengths are partly offset by the high-risk, cyclical airline industry, which is capital intensive and subject to volatile fuel costs. Improving global economic conditions and strong demand from emerging market economies--such as those in Asia-Pacific and Latin America--have supported a continued recovery in global airline traffic during 2010. The International Air Transport Association (IATA) reported that passenger demand was up 8.3% for the nine months to Sept. 30, 2010. Industry capacity has been tightly managed resulting in
