UPDATE 1-Lufthansa, union talk on pay as strike hits flights

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By Angelika Gruber

FRANKFURT, July 31 (Reuters) - Germany's Verdi union and airline Deutsche Lufthansa held informal talks on Thursday to try end a strike over pay that is causing hundreds of flight cancellations and risks running into the weekend.

Lufthansa (LHAG.DE) has said it would cut 128 flights per day until Monday in response to the open-ended strike by ground and cabin staff and warned passengers they would face disruption over the weekend, at the height of the holiday season.

"Lufthansa and Verdi are talking and that's the only way to end this difficult labour dispute," Lufthansa spokesman Klaus Walther said, adding the two sides had agreed not to give out details about the state of the talks.

About 5,000 members of the Verdi services union started walkouts on Monday and the union says it expects the impact to increase.

Europe's biggest airline by passenger numbers had to cancel four in 10 long-haul flights, most of them at Frankfurt airport. One in 10 flights to European destinations were cancelled.

Verdi, which represents some 50,000 ground and cabin staff at Lufthansa, wants an immediate 9.8 percent pay rise. Lufthansa is offering 6.7 percent over 21 months and a one-off payment.

A Verdi spokesman said the union would only enter official talks once the airline had significantly improved its offer.

"At the moment it doesn't look like that," the spokesman said. Verdi wants to continue the strike until an agreement with the airline has been reached.

Lufthansa has to deal with planes being grounded because of a shortage of technical staff able to check, maintain and repair aircraft. Catering and freight workers and some check-in staff have also downed tools.

The airline has shifted some of its planned cargo flights to road transport to avoid major delays, said a spokesman.

Some analysts estimate the walkouts could cost the company 5 million euros ($7.81 million) per day and on Wednesday, the group said soaring fuel costs and a possible weakening in demand were set to push earnings down this year.

At 1625 GMT, Lufthansa shares were down 0.74 percent.

At a time when Europe's biggest economy is experiencing a sharp rise in inflation, several unions are seeking bigger wage deals after restraint in recent years.

Lufthansa, usually runs about 2,000 flights per day.

(Writing by Madeline Chambers and Kerstin Gehmlich in Berlin; editing by Elaine Hardcastle)