* Union says Germanwings pilots to strike on Friday
* Dispute over retirement scheme
* Strike set to run for six hours from 0400 GMT
* 116 flights cancelled on Friday
* Lufthansa shares down 3 percent (Recasts with union response, adds Germanwings customer comments)
By Victoria Bryan and Peter Maushagen
FRANKFURT/BERLIN, Aug 28 A row at German airline Lufthansa over an early retirement scheme for its pilots shows no sign of being resolved any time soon after talks broke down and a strike was announced for Friday at its low-cost carrier Germanwings.
The Lufthansa pilots want the management to maintain a scheme that allows them to retire early at 55 and still keep some of their pay until they reach the age at which state pension payments start.
The Vereinigung Cockpit (VC) union that represents about 5,400 Lufthansa pilots said that pilots at its Germanwings operation would strike for six hours from 0400 GMT on Friday unless a deal was reached during talks on Thursday.
However, Lufthansa ended the talks on Thursday and said it had wanted to use the meeting to agree a timetable for further negotiations, rather than to reach a final deal.
"It is not realistic to expect to reach a deal on a new model for pension provisions in one day," Lufthansa's head of personnel, Bettina Volkens, said in a statement.
The dispute is set against the backdrop of a Lufthansa overhaul to boost competitiveness against no-frills rivals and Gulf carriers, seeking to lift group operating profit to 2.3 billion euros by 2015, up by 1.5 billion euros on 2011, though it says negotiations on the early retirement scheme do not form part of its SCORE cost-cutting programme.
In response to the failure of Thursday's talks, VC said it was preparing for a lengthy battle but that Lufthansa could avoid further strikes by meeting the pilots' demands.
Lufthansa shares extended losses after the announcement that talks had been broken off and were down 2.8 percent at 1430 GMT.
Germanwings cancelled 116 flights planned for Friday morning, equivalent to 70 percent of its flights during the six-hour period. About 15,000 passengers, many of whom are travelling at the end of the summer holiday period, will be affected.
About 700 of the Lufthansa group's more than 9,000 pilots work at Germanwings, which has been taking over Lufthansa's European routes outside of Frankfurt and Munich as the company seeks to stem losses on short-haul routes.
Pilots at Lufthansa held a three-day nationwide strike in April, grounding almost all the company's flights and wiping 60 million euros ($79 million) from its first-half profit.
However, the three-day action was widely condemned across Germany as people criticised the demands of what many regard as a highly paid group of workers. The pilots' union had said this week that any subsequent strike action was likely to be smaller and for only a few hours at a time.
The latest cancellations prompted an angry reaction from Germanwings customers on Facebook, with one describing the union as "insatiable fantasists" and another asking when it would be possible to sack pilots.
Germanwings, which operates with a fleet of 52 aircraft, has 164 flights scheduled for Friday's strike period.
Bankhaus Metzler analyst Juergen Pieper said the six-hour walkout could result in a 2-3 million euro hit to operating profit and that this strike, at least on its own, would not endanger the company's goal of about 1 billion euros of profit this year.
Travellers in Germany also face a possible walkout by employees at rail operator Deutsche Bahn. However, VC and the train drivers union GDL said they would coordinate to avoid a total shutdown of domestic transportation routes. The GDL said on Thursday that it would not go on strike this week.
Germanwings said passengers on domestic German flights would be rebooked on train services where possible.
The early retirement scheme was introduced more than 50 years ago because pilots could not work beyond the age of 55 and were left with a gap of up to eight years before they could draw a pension. The scheme provided for them to receive 60 percent of their wages during the interim years.
Lufthansa wants to scrap the scheme and increase the early retirement age to 61 now that a European court has ruled that pilots can work until the age of 65. The airline initially cancelled the scheme with effect from the start of 2014 but now says it will remain in place until 2016 to allow time for negotiations. ($1 = 0.7567 euro) (Additional reporting by Maria Sheahan and Hans Seidenstuecker; Editing by Pravin Char and David Goodman)