Despite a makeover, Swiss has struggled

Investors, however, were not deterred, and shares in Swiss rose by 17% to 8.5 Swiss francs on Monday morning.

"There is definitely no offer," Deutsche Lufthansa spokesman Klaus Walther said in Frankfurt.

The Swiss carrier, which was formed after the collapse of Swissair at the beginning of last year, declined to name Lufthansa, but said it was in talks with several airlines about cooperation in response to the speculation.

The Swiss Sunday newspaper, SonntagsZeitung, reported at the weekend that the German carrier had made a firm takeover bid that would guarantee Swiss' survival in a slimmed-down form.

The Swiss airline was formed with the help of some 2.7bn Swiss francs (�1.2bn; $2bn) in fresh financing, including some money from the state.

But despite aggressive marketing, it has failed to achieve its predicted growth, and operating conditions for all airlines have remained worse than many forecast.

Issues outstanding

Swiss said last week that it would cut its route network by more than one-quarter.

It previously announced plans to slash its fleet and staff by about one-third.

This action, if successful, is likely to make Swiss more attractive as a takeover target; several competitors, including Lufthansa, have previously said they want the airline to put its own finances in order before they will consider a tie-up.

Outstanding issues remain hammering out new contracts with restive unions, and securing a new credit line from its bankers.