German airline Deutsche Lufthansa AG Tuesday lowered its earnings outlook for 2011, saying that poor results at its passenger operations in August and continued economic uncertainty are weighing on its business.

Lufthansa said it no longer expects to exceed the previous year's operating profit of EUR876 million (US$1.20 billion) in 2011, and now expects its 2011 operating profit to come in at the "upper end of the three-digit-million-euro range."

Its shares fell sharply and the news dragged down the stocks of Europe's other airlines. Lufthansa's shares fell 5.5% to EUR10.21, International Consolidated Airlines Group SA dropped 1.6% to 152 pence and Air France-KLM SA lost 3.3% to EUR5.76.

Lufthansa has been relatively unaffected by the economic crisis that is gripping the euro zone, but business confidence in Germany has waned amid concerns of a slowdown. Those worries have forced some companies to review their corporate travel budgets. While August is a popular month for leisure travel, September and October are busy months for more lucrative business travel.

"The adjustment undertaken reflects a weaker than expected monthly result for August reported by the passenger airline group," the company said in a statement. "In view of ongoing economic uncertainties, further booking trend expectations were also adjusted."

IAG, the parent company of British Airways and Spain's Iberia, earlier this month reported a 3.6% year-to-year drop in passenger numbers in August. However, revenue continued to grow, largely due to 8.7% year-to-year growth in premium traffic. It declined on Tuesday to comment on future bookings.

The bad news comes as the International Air Transport Association on Tuesday raised its expectations for 2011 net profit for the global airline industry to US$6.9 billion compared with its previous estimate of US$4 billion.

Lufthansa declined to provide further details on how the quarter was unfolding, but it repeatedly has said over the past few months that its continental European passenger business faced tough competition from low-cost carriers such as Ryanair Holdings PLC.

Airlines that Lufthansa acquired in the past three years -- Austrian Airlines and British Midland Airways, or bmi -- have recorded operating losses in the first six months of the year as high crude-oil prices and political upheaval in the Middle East and North Africa took their toll.

People familiar with the matter previously said that Lufthansa has launched a sale process for bmi and has hired Morgan Stanley to prepare and run the sale. Several airlines have already expressed interest in bmi, including IAG and Virgin Atlantic.

In response to uncertain demand caused by economic fragility, Lufthansa plans to further cut passenger capacity for the winter flight schedule 2011/2012, it said.