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Business

Lufthansa Partnership Bolsters Eurowings

The increase in revenue seen last year by German carrier Eurowings suggest it has been able to weather the aviation industry crisis better than most of its rivals, but much of its growth comes from its partner Lufthansa.

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Lufthansa has helped to boost regional German carriers

German regional airline Eurowings has so far done well in weathering the crisis in the global aviation industry triggered by the September 11 terrorist attacks in the U.S. last year.

The group reported on Monday a 13 per cent rise in revenue to 460 million euros, and a 11 per cent rise in passenger numbers to 3.5 million in 2001.

But Eurowings' new partner, Deutsche Lufthansa AG, was partly responsible for the growth rates.

After the national carrier was unable to continue operating certain routes profitably after September 11, Eurowings took them over with its smaller 50 to 100-seater aircraft.

Since summer 2001, all of Eurowings' scheduled services have been operated in cooperation with Lufthansa, which holds a 24.9 per cent stake in the regional carrier.

An option for Lufthansa to increase this stake to 49 per cent was approved by the Federal Cartel Office in September 2001, but only under strict conditions."We have successfully implemented our new strategy in the shortest of times,"; Eurowings' chief executive, Friedrich-Wilhelm Weitholz, said at the results conference on Monday.

Even its partnership with Lufthansa was unable to prevent Eurowings from posting a loss for last year. It booked an operating loss of just over 1 million euros, after a profit of 7.8 million euros in the previous year.

"Satisfactory result"

But Weitholz said that considering the difficult market conditions, the result was satisfactory. An improvement in conditions was expected in autumn this year at the earliest, Weitholz said.

Eurowings' seat-load factor; i.e. the average number of seats filled per aircraft per flight; bore the marks of the industry downturn. It came in at 52.1 per cent, meaning many of the aircraft flew only half-full.

Industry experts believe that Eurowings would operate at a profit with a seat-load factor of between 55 per cent and 60 per cent.

The airline's results were also burdened by a strong increase in costs. Weitholz said that the company's monthly insurance premium was now equivalent to what it used to pay for a full year.

In the first quarter of the year, which is traditionally the weakest in the industry, Eurowings booked an operating loss of 4.4 million euros.

Because of continued unsatisfactory capacity utilization, the airline plans to reduce its fleet to 48 aircraft from the current 50 this summer. Eurowings' charter services, which it operates with a small fleet of Airbus aircraft, are also providing cause for concern.

Tour operator Thomas Cook cut 16 per cent of its flight capacity following a slump in holiday bookings. Eurowings dismissed speculation that it might pull out of this sector completely, but said it was considering a "repositioning".