CORRECTED-UPDATE 1-Lufthansa says former CEO will no longer run for chairman

Mon May 6, 2013 6:41am EDT

(in third paragraphm, corrects Mayrhuber's board memberships, adds company statement)

* Wolfgang Mayrhuber withdraws after shareholder criticism

* Mayrhuber was CEO from 2003-2011

* Lufthansa board to choose new candidate on Monday

* Annual shareholder meeting on Tuesday

FRANKFURT, May 6 (Reuters) - Lufthansa's former chief executive Wolfgang Mayrhuber has withdrawn as a candidate to become chairman of Germany's largest airline following protests from shareholders, the company said on Monday.

Daily newspaper Frankfurter Allgemeine Zeitung said proxy advisory firm ISS had recommended shareholders vote against Mayrhuber because he has amassed too many supervisory board positions.

He is chairman of the supervisory board at German chipmaker Infineon and a board member at reinsurer Munich Re and luxury carmaker BMW. Until last week, he was also a board member of Swiss bank UBS.

ISS also felt that a two-year "cooling-off period" between his stepping down as chief executive and his appointment as chairman, prescribed under German corporate governance guidelines, would be too short, the paper said.

ISS was not immediately available for comment.

"Wolfgang Mayrhuber has withdrawn his candidacy due to criticism from shareholders regarding his nomination," Lufthansa said in a statement.

Under Mayrhuber, Lufthansa expanded rapidly, buying up BMI of Britain, Austrian Airlines and Swiss.

The deals did not pay off. Austrian Airlines is still loss-making despite years of heavy cost-cutting and Lufthansa agreed to sell BMI in late 2011.

Previous Chairman Juergen Weber, who is retiring, named Mayrhuber as his preferred successor.

Institutional investors including Union Investment had reservations about Mayrhuber being named chairman as long as his successor is still dealing with his legacy.

Lufthansa said its supervisory board would discuss a new nomination for chairman on Monday.

The airline's annual shareholder meeting, at which the appointment of Mayrhuber was up for approval, is being held on Tuesday.

Lufthansa shares were down 1.2 percent at 0726 GMT. (Reporting by Victoria Bryan and Maria Sheahan; Editing by Tom Pfeiffer and David Cowell)