Lufthansa has cut growth plans for this year after seeing "substantial pricing pressure" across the group.
In its first quarter financial report the German airline said it will boost overall capacity by 6 per cent this year, down from 6.6 per cent with more cost reductions expected.
The warning comes after Lufthansa posted a net loss of €8 million in the first three months of the year, compared to a profit of €425 million the previous year.
“The intensity of the competition and the resulting pricing pressures will not ease, not least because of the low fuel costs,” said Simone Menne, Lufthansa’s finance director.
“This is why it is important that we continue to work consistently on our cost positions. We remain fully committed to our goal of reducing our unit costs this year net of fuel and currency impacts.”
The airline reported that total revenue fell by 0.8 per cent to €6.9 billion in the first three months of 2016 with traffic revenue down 3.9 per cent, this was despite "significantly higher passenger volumes". The airline said this was a reflection of the substantial pricing pressures faced by the group.
Lufthansa has been battling with unions over the past couple of years as it attempts to bring costs down to compete more with European low cost carriers such as Ryanair and Easyjet.
Last year, it was hit by strikes by both pilots and cabin crew, which cost Lufthansa €231m in lost earnings.