UPDATE 1-Fraport sees risks for Frankfurt passenger demand

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FRANKFURT, Sept 11 (Reuters) - Fraport AG (FRAG.DE) said the worsening economy and flight streamlining by airlines could hit passenger demand at its main Frankfurt hub after August saw the biggest traffic drop in more than five years.

Fraport added on Thursday that it saw no rapid recovery in air cargo after the economic situation and the consolidation of airline services led to a 5.2 percent decline in air freight at Frankfurt airport last month.

Passenger numbers at Europe's third-biggest airport fell 3.9 percent in August from a year earlier, the largest fall since May 2003, as strikes at its main airline customer, Lufthansa (LHAG.DE), spurred many travellers to switch to trains.

The consolidation of airlines wrestling with record fuel prices, weaker traffic during China's visa restrictions for the Olympic Games and a cyclical decline in vacation travel also impacted traffic, Fraport said in a statement.

"The outlook for the remainder of the year continues to be optimistic because of the booking situation for the autumn vacation period," Fraport said. "However, the regressive business trend and the additional streamlining of airline flight offers could impact passenger demand in the coming months."

Fraport added: "In view of the market outlook for the rest of the year, airfreight throughput is currently not expected to recover rapidly."

Fraport shares fell 1.6 percent to 39.42 euros by 0803 GMT, compared with a 0.3 percent firmer mid-cap index .MDAXI.

Fraport is battling with capacity restrictions at Frankfurt airport ahead of the opening of a fourth runway in 2011 and a third terminal but has said it sees passenger growth of 1-2 percent this year, a forecast it reiterated last week.

Frankfurt airport traffic rose 0.7 percent in the first eight months of this year to 36.25 million passengers. Cargo increased 2.1 percent.

Fraport added that it was optimistic about intercontinental traffic, which increased more than 2 percent last month and accounts for 40 percent of the total at Frankfurt. Long-haul passengers tend to spend more at the airport. (Reporting by James Regan; Editing by Paul Bolding)