German airline Lufthansa has blamed the sluggish world economy, conflict with Iraq and the SARS outbreak for the industry's "greatest economic crisis ever".

Lufthansa chief executive Juergen Weber said "the situation has never been more serious", with the worldwide decline in demand hitting major operators.

The German airline said its sales fell 4.6% in the first three months of the year.

It warned further cost cutting measures were needed to keep the company's head above water.

Asian crisis

"If we want to remain a healthy company and keep our staff on board, we have to further reduce our costs in cooperation with our internal and external partners," said Mr Weber.

But, he added, cost-saving alone "is not the future".

"At the same time we must invest in our products for tomorrow if we want to keep a competitive edge."

In light of its recent performance, Mr Weber said he no longer expected Lufthansa to finish the year with positive operating figures.

For the first three months, it reported a net loss of 356m euros (�254m) against a loss of 186m euros the previous year.

Its operating loss was 415m euros, against a profit of 12 m euros the year before.

"In view of the current uncertainties, it is impossible to estimate the expected loss (for the year)," said Mr Weber.

Lufthansa said it had been particularly badly hit by the SARS epidemic in the Asia-Pacific region, where it was building considerable market share.

Convincing?

Passenger numbers slumped in April as the epidemic took its toll.

As a result, Lufthansa has grounded 70 aircraft, 15 alone on routes to Asia.

But Mr Weber insisted Lufthansa was still in robust financial health.

"We have proved repeatedly that we can overcome crises by pooling our strengths," he said in a statement.

He said the company would be able to maintain its financial position "even if the crisis proves to be protracted".

Investors appeared less convinced, with shares falling 4% in early trade on the Frankfurt stock exchange to 8.81 euros.