UPDATE 2-Lufthansa sees more gloom ahead for aviation sector

* Says volume stabilisation not offsetting price pressure

* Says too early to give all-clear for cargo industry

* Shares fall 0.1 percent

(Adds analyst comment, Japan Airlines, Finnair)

FRANKFURT, Oct 29 (Reuters) - Deutsche Lufthansa (LHAG.DE) provided a gloomy outlook for the airline industry on Thursday, saying any green shoots of recovery were being swamped by pricing pressures in both passenger and cargo services.

"Initial signs of a stabilisation in volumes are far away from making up for the enormous and unrelenting pressure stemming from the massive fall in price levels," the company said in its quarterly financial report.

It said it was still too early to give the all-clear for the air cargo industry. Drops in volumes were not as severe as in prior quarters, but revenue was still falling steeply due to falling prices over recent months.

The German flagship carrier, which is Europe's biggest air cargo company, had sounded a warning on Wednesday that it could miss its target of making an operating profit in 2009, blaming stubbornly low demand and a fresh rise in oil prices. [ID:nLS465316]

Industry body IATA said last month that the aviation sector was still far from returning to profit, although demand had started recovering from a steep slump. It has said it sees the world's airlines losing $11 billion this year. [ID:nLT509941]

Lufthansa's third-quarter operating profit fell 21 percent to 218 million euros ($323.4 million), well above the 54 million euro average analyst forecast in a Reuters poll due mainly to one-time effects related to recent acquisitions.

"Whilst these results are in line with UBS expectations it is the progress management are making in integrating the new acquisitions and in executing their cost-cutting plans that we expect to be the key catalysts for the stock," UBS analysts said in a note.

Lufthansa shares rose 0.9 percent to 10.46 euros by 0829 GMT, while Germany's blue-chip index .GDAXI was down 0.1 percent.

MOVING TO ECONOMY

Airlines around the world have suffered this year as consumers tightened their purse strings and companies cut travel budgets, moving passengers from pricey business class seats to cheaper ones at the back of the plane.

Finnish national carrier Finnair (FIA1S.HE) saw third-quarter sales fall sharply due to declining demand for business travel, and the company said it would continue to make losses in the second half. [ID:nLS157770]