People fly less because of the war and the Sars outbreak

"The continuing weak economic environment, especially in Germany, the impact of the Iraq war and the unforeseeable consequences of the Sars respiratory disease are exacting a sustained toll on business developments," the German airline said in a statement.

Lufthansa said it would further reduce staff costs as well as changes to its flight schedules in an effort to fight one of the worst slumps in aviation history.

The airline said on Tuesday it would cut the working week for ground staff by 1.5 hours to 36 hours from 15 April , and would also introduce short-time working for cabin crew.

Cut costs

Lufthansa said in the statement the company would be holding talks with its pilots on how to deal with the crisis.

"We are seeking both to cut costs and safeguard jobs," the airline said.

Shares in the German airline ended 6% weaker at 8.53 euros on the German stock market.

At the end of March, Lufthansa warned that war on Iraq could prolong the troubles the airline industry has faced since the 11 September attacks.

It also repeated a warning that Lufthansa expects lower revenues in 2003 than last year.

Since 11 September, airlines worldwide have grappled first with a huge slump in passenger numbers then with rising oil prices.