June 16 (Bloomberg) -- Deutsche Lufthansa AG, Europe's second-biggest airline, said it plans to mix biofuels with conventional jet kerosene as part of an environmental strategy.

The company intends to use jet fuel that's as much as 10 percent biofuel by 2020, the Cologne, Germany-based airline said in a statement today. The airline also said it aims to cut carbon-dioxide emissions per kilometer flown by 25 percent by 2020, compared with 2006.

Airlines and aircraft makers are racing to develop a viable alternative to jet fuel as the price of oil rises and aviation is increasingly blamed for contributing to global warming. Virgin Atlantic Airways Ltd. conducted in February a test flight partly powered by biofuel made from babassu nuts and coconut oil. Lufthansa wants to use biofuel made from non-food sources such as algae, spokesman Peter Schneckenleitner said today.

Lufthansa's environmental initiative ``clearly demonstrates that we are firmly intent on doing our share in the future in shouldering our responsibility for environment and climate protection,'' Chief Executive Officer Wolfgang Mayrhuber said at a news conference in Frankfurt.

Airlines worldwide may report combined losses of $6.1 billion this year, the worst since 2003, as waning economic growth and spiraling fuel costs wipe out earnings, the International Air Transport Association said June 2. Jet-fuel prices in northwest Europe have jumped 47 percent this year, Bloomberg data show.

Alternative Fuel Tests

Rolls-Royce Group Plc, the world's second-largest maker of aircraft engines, and Airbus staged a joint test Feb. 1 of a gas-to-liquid fuel on a double-decker A380, the first flight of a jetliner using a fuel other than kerosene. The Toulouse, France-based planemaker described the technology as a precursor to biofuel, which it said it will use once available.

Boeing Co. and Virgin Atlantic, the London-based carrier controlled by billionaire Richard Branson, followed the Airbus flight that month with their biofuels test. The Boeing 747-400 had one unmodified engine running on a mixture of about 25 percent biofuel and the remaining three powered by standard kerosene. That trial was run in partnership with Rolls-Royce's larger competitor General Electric Co.

Lufthansa's Schneckenleitner said the airline is talking with manufacturers on the use of biofuels, though the carrier hasn't set any date for a possible test flight.

Hedging Strategy

The airline has a strategy of protecting earnings from rising kerosene costs with price-hedging measures and ticket surcharges. The company set a 2008 goal of matching or exceeding last year's record operating profit of 1.38 billion euros, provided it can compensate for higher fuel costs and the economic environment remains intact. The German carrier is 84 percent to 85 percent hedged for kerosene this year and by 40 percent to 45 percent for 2009, Mayrhuber said today.

Mayrhuber also told reporters the airline's first A380 will be delivered in the fall of 2009. Lufthansa had originally expected the first of the 15 superjumbos it ordered to be delivered next summer.

Spokeswoman Amelie Lorenz specified that delivery of the first jet was postponed to the fourth quarter of 2009 because of renewed delays at Airbus. The planemaker announced earlier this year the jet would be delayed by an additional three months on average.

To contact the reporter on this story: Jann Bettinga in Frankfurt at jbettinga@bloomberg.net.

Last Updated: June 16, 2008 08:30 EDT