Lufthansa is considering a commercial partnership with Alitalia, but has ruled out a financial investment.

“Investing is out of the question for us alongside a state-owned entity,” Lufthansa Group CEO Carsten Spohr said Oct. 30. “A commercial partnership is on the agenda for the next few months; we know the management team at Alitalia very well.”

Binding bids for a stake in Alitalia are due Oct. 31 and Lufthansa has in the past expressed an interest in investing. However, the German airline has made clear what measures would have to be taken in terms of restructuring the airline before it would commit to putting in its own money. Those proposals have been rejected by the Italian government, which has kept the carrier flying through bridge loans since the airline went into the Italian equivalent of bankruptcy.

Spohr said Lufthansa wants to continue to play an active role in European airline market consolidation. He has hinted in the past that conversations have taken place with long-haul LCC Norwegian.

Lufthansa Group’s own LCC, Eurowings, has integrated around half of the former airBerlin operation since the competitor stopped flying one year ago. As part of that, Lufthansa paid €170 million ($193 million) to incorporate airBerlin aircraft into Eurowings’ fleet and to deal with operational chaos that dominated the build-up of its capacity through the summer. Overall, Lufthansa Group has had to cancel around 18,000 flights this year, the equivalent of shutting down its Frankfurt hub for two weeks.

While Spohr expects Eurowings’ problems to slowly come under control–and the affiliate to post a profit in 2019–the group is facing new headwinds in the form of rising fuel costs. In 2018, it already anticipates €850 million in extra expenses for the full year, but it appears to be able to fully compensate for them. For 2019, another €900 million will come on top and the company is seeking measures to counteract this to avoid an impact on margins.

Lufthansa CFO Ulrik Svensson said measures were needed both on the revenue and cost sides. Spohr said the fuel cost increase “has to have an impact on fares, in particular at the bottom end of the fare spectrum.”

The cheap entry level fares seen in 2018 “have no future,” he said. But he cautioned that fare increases are going to have to be decided “by the market.”

Lufthansa is also reducing planned capacity growth in the summer of 2019. It now expects to increase capacity by 3.8%, while initial plans called for more than 5% expansion. Eurowings is slowing down after the out-of-sequence hike of 23% more capacity in the first nine months of 2018. Lufthansa is also moving growth away from Frankfurt, from where it will remove Airbus A321s and A340-600s next summer. The A321s will be replaced by Bombardier CRJ900s to protect slots. Most of the larger aircraft will be based in Munich, while some will move to Zurich and Vienna.

Investors did not like the airline’s guidance–Lufthansa’s shares lost 8% in the afternoon.

However, traffic remains encouraging, at least in part. Yields to Asia-Pacific were up 1.9% in the third quarter and stable for traffic to the Americas. In Europe, they fell by 4.3%.

Jens Flottau,