LUFTHANSA NEARS DEAL FOR US AIRLINE PARTNER

LUFTHANSA NEARS DEAL FOR US AIRLINE PARTNER

Lufthansa German Airlines is close to a deal with a U.S. airline that would give the carrier access to more destinations in the United States, a member of Lufthansa's board said Tuesday.

U.S. airline industry analysts believe Lufthansa may be looking at USAir Group Inc. as a possible partner."We are close to an agreement, but there still are some issues which must be cleared up," Adrian von Doernberg, a Lufthansa board member, said in an interview.

"It's no secret that Lufthansa has been talking to USAir," said Irina Reuss, a spokeswoman for Lufthansa's U.S. operations in Miami. But she said as far as a definitive agreement goes, nothing is in the works right now.

"Yes, we are talking to a few people," she said. "Discussions have been going on for some time with USAir. They were looking for a capital investment."

The German airline also said it held discussions with United Airlines, a unit of UAL Corp.

Mr. von Doernberg said Lufthansa needed a strong American partner to

serve as a feeder within the United States for the company's international network.

"We need connecting flights," Mr. von Doernberg said, without naming a prospective partner.

Arlington, Va.-based USAir, which lost hundreds of millions of dollars in recent years, is still trying to absorb two big acquisitions made in the late 1980s - Pacific Southwest Airlines and Piedmont Aviation.

With 46,000 employees and 429 planes, the nation's sixth-largest carrier flies to 39 states, the District of Columbia and Puerto Rico. It also flies to three European cities, London, Frankfurt and Paris and recently reached a deal to buy Trans World Airlines Inc.'s Baltimore-Washington and Philadelphia-to- London routes.

Julius Maldutis, an analyst at Salomon Bros., said he believes Lufthansa and USAir are near a deal.

"It will include, at a minimum, a broad marketing agreement and code- sharing," Mr. Maldutis said. "I'm not sure if it will include an investment" by Lufthansa.

Kevin Murphy, a Morgan Stanley analyst, said it was unclear what scale a linkup with USAir might take but added, "I'd be very surprised if it was not USAir."

Mr. von Doernberg said Lufthansa had to return to profitability on its North Atlantic routes because they accounted for 30 percent of its revenues.