One of Europe's largest airlines, the German carrier Lufthansa, has said it will not be paying a dividend to shareholders after suffering its first full-year loss for a decade.

Lufthansa suffered a pre-tax loss of 754m euros (�464.7m; $660.7m) in 2001, according to provisional figures.

Its net loss reached 591m euros while its operating profit plunged to 20m euros, down from more than 1bn euros a year earlier.

"The dividend cut is a signal to the market that the management expect tough market conditions in the current year, and that the operating profit will be only slightly higher," HVB Group analyst Uwe Weinreich said.

Investors responded by selling Lufthansa shares, sending the stock 6.4% lower to 18.44 euros shortly before the close of trade on Tuesday.

Falling passenger numbers

The airline said the profits drop reflected the global economic slowdown as well as the downturn in air traffic after the attacks on the United States in September.

"The impact of the terrorist attacks and the weakening global economy gravely affected the past business year," Lufthansa said.

In addition, the company faced an expensive series of pilots' strikes last year.

Yet, the result was somewhat better than analysts had expected in a year when many airlines made huge losses.

Lufthansa's shares have more than doubled in value since hitting a low of about 8 euros soon after 11 September.

Recovery hopes

Lufthansa may be gearing up ahead of an anticipated recovery.

Earlier this month, Lufthansa lifted its hiring freeze and it has said some of the 43 aircraft it grounded following 11 September could fly again soon.

But some analysts remain sceptical.

"The fact that traffic may be recovering isn't a panacea for the recovery of the financial performance of the industry," said Commerzbank analyst Chris Tarry.