Bloomberg.com | By Tom Lavell

Deutsche Lufthansa AG, Europe’s second-largest airline, may resume flights to Baghdad after 20 years as economic-growth prospects boost air-travel demand.

The carrier has applied for traffic rights to serve the Iraqi capital and northern city of Erbil, and is looking at how to ensure smooth operations including flight security, said Boris Ogursky, a spokesman at Lufthansa’s main hub in Frankfurt.

“The demand goes in both directions,” and the airline aims to start service in mid-2010, Ogursky said, adding that it’s too early to specify a number of flights.

The carrier, which began flying to Baghdad in 1956, said in a statement that it halted flights in 1990 because of the Gulf War, when U.S.-led forces reversed Iraq’s invasion of Kuwait. The Iraq routes would be served from Frankfurt and Munich. Vienna-based Austrian Airlines, which Lufthansa took over last year, started flights to Erbil in late 2006 and resumed services in April 2008 following a mid-2007 suspension because of security concerns.

Iraq holds the world’s third-largest crude-oil reserves, and average production in December increased 2.1 percent to 2.4 million barrels a day. Royal Dutch Shell Plc, China National Petroleum Corp., OAO Lukoil and Statoil ASA were among bidders that won seven oil-project service contracts in December as part of the government’s effort to triple daily output to 7 million barrels in six years.

Air Berlin Plc, Europe’s third-biggest discount airline, has posted online flight schedules to both Erbil and Sulimaniyah from four German cities in anticipation of starting services as early as February, said Yasmin Born, a spokeswoman. The carrier is entering the market because of interest from an Iraq-based charter customer, she said, adding that details will be announced once Air Berlin wins regulatory clearance.

BMI, a U.K. carrier that Lufthansa also acquired last year, said last April that it was interested in offering London- Baghdad flights. Spokesmen at BMI and competitor British Airways Plc said today that they aren’t planning flights to Iraq soon.