German carrier Deutsche Lufthansa AG (LHA.XE) will pursue further cost cuts in its operations and within its new acquisition Austrian Airlines AG (AUA.VI) as it anticipates continued tough times for the aviation industry, Lufthansa's chief executive said Thursday.

Speaking to journalists in Vienna after the signing of the Austrian Airlines deal, CEO Wolfgang Mayrhuber raised further job cuts as a possibility, saying "only profitable jobs are safe jobs."

He doesn't expect a marked improvement in revenue or demand for flights in the near future, adding: "In the near and middle term, we will have to make do with the level we have now."

Mayrhuber expects the highly indebted and loss-making Austrian carrier to have positive cash flow in 2010, but actual profitability could take longer as it would also depend on unpredictable factors such as fuel price developments and flight demand.

"We will get to work now to set a target for turning Austrian Airlines to profitability as soon as possible," he said.

Austrian Airlines' Co-Chief Executive, Andreas Bierwirth said cost cuts had already been made, but more were needed.

"We intend to grow in the future, but we can't start growing until the company is operationally profitable, and that must be achieved through the reduction of costs," he said.

Austrian Airlines will prepare a business plan for the coming year, which includes flight network adjustments, cost cut efforts, product developments and results targets. The plan will be presented in four to six weeks time, Bierwirth said.

Austrian Airlines was put up for sale after suffering a hit from fuel prices and later from dwindling passenger numbers.

Lufthansa won the tender for the Austrian state's 41.6% stake in Lufthansa last year and declared it would offer EUR4.49 for each outstanding share in a public offer for the free float. The deal needed European Union Commission approval, which was given on the condition Austrian Airlines shed some flight capacity.

Lufthansa said earlier Thursday it now has more than 90% of the share capital and intends to squeeze out the remaining minority shareholders.

Without detailing the intended squeeze-out offer, Mayrhuber said the remaining shareholders will be offered less than the EUR4.49 a share paid to shareholders which took the initial offer.

Mayrhuber said Austrian Airlines, with its strong focus on Eastern European destinations, offers a good product in terms of service and route network, but it "has a cost problem" which needs dealing with.

To Lufthansa, a main asset of Austrian Air is its Eastern European medium- and short-haul routes.

Lufthansa also intends to keep Austrian Air's long-haul route network largely intact, Mayrhuber said.

He said Lufthansa's buying spree of the past year, according to the current plans, ended with the purchase of Austrian Airlines.

At 1249 GMT, Lufthansa's shares traded up 2.1%, or EUR0.22, at EUR10.87, while the Frankfurt DAX index traded up 0.3%.

Company Web sites: www.lufthansa-financials.com; www.austrian.com

-By Flemming E. Hansen, Dow Jones Newswires; +43 1 513 69 22 10; flemming.hansen@dowjones.com