Lufthansa expects a healthier 2004

The loss also included a 700m euro charge for the write down of the value of its catering arm, Chef Solutions.

But the airline said 2004 was likely to be better, after first quarter figures were up on the same period last year.

Industry bodies also expect the aviation sector as a whole to show strong signs of recovery during 2004.

Earlier this week, International Air Transport Association (Iata) director general Giovanni Bisignani said the global airline industry will post profits of between $2-4bn this year, against estimated losses of $6.5bn in 2003,

"Without surprises (such as a resurgence of Sars) 2004 will be better, " Mr Bisignani said.

"Our expectations include a 7% growth in global passenger traffic and 4% in cargo (this year)."

Tough times

Lufthansa, along with many of the traditional flag-carrying European airlines, has suffered in recent years from the post-September 11 downturn in air traffic, the impact of the Sars virus and competition from low-cost competitors.

Many airlines have been forced to make dramatic cost cuts, involving cutting routes, services and staff numbers.

Lufthansa's operating profit collapsed by 96% to 30m euros last year, down from 718m euros in 2002.

But the airline said there were signs that it had managed to turn the corner.

"Data available for the first quarter 2004 shows a favourable development compared with the previous year," Lufthansa said in a statement.