EUROPE'S airline industry felt the pinch from the global financial crisis today as the Denmark-based low-cost carrier Sterling Airways filed for bankruptcy and German giant Lufthansa reported a 75 per cent nosedive in net profit.

Sterling, which had been in difficulty for several years, announced it was abandoning efforts to keep the airline flying, blaming exposure to the collapse of Iceland's financial sector.

"Over a three to four week period, the whole financial system melted down, and that resulted in our shareholder being unable to continue his support to the company,'' Sterling said in a statement, nearly three months after it was sold to Icelandic business tycoon Palmi Haraldsson.

The collapse of the company left passengers stranded. All flights were cancelled and travellers holding tickets would not be refunded, Sterling said.

The company, which was earlier owned by Northern Travel Group, comprised of Icelandic investment groups Fons, FL Group and Sund, would file for bankruptcy later today, the statement added.

Meanwhile, Lufthansa airline reported a 75 per cent fall in net profit in the third quarter due to high fuel costs and weakened sales arising from the credit crunch.

The airline posted 149 million euros ($295.3 million) in net profit between July and September, after saying yesterday that it would cut its 2008 operating profit target to 1.1 billion euros ($2.18 billion) from 1.38 billion euros ($2.73 billion), the same figure it posted last year.

Operating profit in the third quarter plunged by 53.4 per cent to 279 million euros ($552.91 million), the company said in a statement.

In the first nine months of the year, operating profit fell by 9.3 per cent to 984 million euros ($1.95 billion). Net profit during the same period plummeted by 65.1 per cent to 551 million euros ($1.09 billion).