UPDATE 2-Lufthansa battles to compensate strikes, low cost rivals

Tue May 6, 2014 5:59am EDT

Related Topics

* Q1 adj operating loss 190 mln eur vs poll 123 mln

* Unit costs reduced by 3.7 pct

* Pricing under pressure in Europe, North America

* 2014 profit targets maintained despite strike

* Shares up 3.2 percent (Adds comments from CFO on hubs, rivals, context)

By Victoria Bryan

FRANKFURT, May 6 (Reuters) - Lufthansa, Europe's largest airline by revenue, said it was working hard in a difficult market to recoup earnings lost through a series of strikes as it reported a narrower first-quarter loss on Tuesday.

The Germany-based company is also fighting competition from low-cost rivals such as Easyjet, Ryanair and Vueling, which are increasing services to larger airports, making it harder for Lufthansa to recoup losses from last month's three-day pilot strike.

Air France-KLM last week also spoke of a tough economic climate and airline industry body IATA said on Tuesday that demand for air travel had slowed in March, with growth of 3.1 percent, compared with 5.6 percent in February.

Lufthansa kept its target for 2014 adjusted operating profit of 1.7-1.9 billion euros, even though strikes have cost it more than 70 million euros in lost profit this year.

"Compensating for the strike impact is now top of our agenda, especially as we have not managed to close the gap in forward booking that has appeared during the strike by the pilots' union," Chief Financial Officer Simone Menne told analysts and journalists.

She added that March was expected to be the weakest point of the market, and April had been better.

Menne also said the airline was seeing yields - a measure of revenue per passenger - coming under pressure at its Frankfurt and Munich hubs and that North American routes were not performing as well as in the past.

Still, while yields fell an adjusted 1 percent in the quarter, a 3.7 percent drop in unit costs, not including the impacts of lower fuel prices and currency effects, pleased investors and the shares were up 3.2 percent to 18.2 euros as of 0958 GMT.

For the quarter, which is traditionally loss-making for airlines, Lufthansa reported an adjusted operating loss of 190 million euros ($263.7 million).

Menne said that talks with pilots, whose strike last month caused the cancellation of almost 4,000 flights, were constructive but added that she could not rule out further strikes.

In Venezuela, where dozens of airlines are owed a total $3.9 billion from ticket sales due to currency controls, Menne said the group was still waiting on hundreds of millions of euros. The devaluation of the bolivar currency also took 38 million euros off first-quarter results, she said.

($1 = 0.7205 Euros) (Reporting by Victoria Bryan; editing by David Goodman and Jason Neely)

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