By Peter Maushagen
FRANKFURT (Reuters) - A walkout by Lufthansa (DE:LHAG) pilots in a long-running pay dispute led to more flight cancellations on Thursday and hit bookings at one of Europe's biggest airlines.
Pilots represented by the Vereinigung Cockpit union began the three-day strike - their 14th since early 2014 - on Wednesday, prompting the grounding of almost 1,800 flights.
Lufthansa said it will scrap a further 830 short- and medium-haul flights on Friday, just over a quarter of its schedule, hitting more than 100,000 travelers. Most long-haul flights will be unaffected, it said.
Over the three days, the strike action has disrupted the travel plans of more than 315,000 passengers.
Harry Hohmeister, a Lufthansa board member, said cancellations for the first two days of strike action had cost the airline about 20 million euros ($21 million) and customers were making fewer bookings.
"Not only have we suffered severe damage (from the strike), but we're also noticing from mid-term booking numbers that customer behavior is changing," Hohmeister said.
Shares in the company were down 0.4 percent at 1441 GMT (9:41 a.m. ET), underperforming German blue chips (GDAXI), which were up 0.1 percent.
COST SQUEEZE
The union wants an average annual pay increase of 3.7 percent for 5,400 pilots in Germany over a five-year period from 2012. Lufthansa has offered 2.5 percent over six years to 2019.
The airline has urged the union to enter mediation, but the union said it first wants to see a better offer.
Lufthansa, led by CEO Carsten Spohr, insists that despite a record profit in 2015, it has no choice but to cut costs to compete with leaner rivals such as Ryanair (I:RYA) on short-haul and Emirates [EMIRA.UL] on long-haul flights.
It has already agreed deals with the main unions representing ground staff and cabin crew in Germany, leaving an agreement with its pilots outstanding.
"From a shareholder perspective we would rate the efforts of management to make the company financially sustainable in the long term as more valuable, than the short term pain inflicted by the strikes," Commerzbank (DE:CBKG) analysts said in a note.
Pilot strikes in 2014 cost Lufthansa 222 million euros, roughly 21 million euros per day, according to the IW Cologne Institute for Economic Research. In 2015, walkouts by pilots and cabin crew cost it 231 million euros, around 30 million per day.
Despite the row with its German pilots, Lufthansa is also moving forward with plans to expand lower cost operations, using a Eurowings unit based in Austria. It is in talks over bringing operations from Air Berlin and Brussels Airlines into the Eurowings platform.
The row is mirrored at rival Air France-KLM (PA:AIRF), which has also seen pilot strikes in France over plans to lower costs.
(Additional reporting and writing by Caroline Copley in Berlin; Editing by Alexander Smith)