* Warns on Japanese yen and Indian rupee weakness
* Growth slows from year-earlier quarter
* Pins hopes on radical restructuring programme
* Cuts 2013 cargo outlook
* Shares fall 3.3 percent vs flat German blue-chip index
By Marilyn Gerlach
FRANKFURT, Oct 31 (Reuters) - Lufthansa warned that weaknessin Asian currencies would weigh on revenue growth at itspassenger airline business this year and that a grindingly slowmarket recovery was set to dent profit at its cargo unit.
The German flag carrier said the weak Japanese yen andIndian rupee in particular weighed on third-quarter revenues atthe passenger division, its biggest business.
Lufthansa shares dropped 3.3 percent, underperforming a flatblue-chip DAX index.
"The Passenger Airline Group is now forecasting for 2013 arevenue on par with previous year," it said on Thursday. Theprevious forecast had been for a moderate increase in revenue.
Lufthansa, however, stuck to a stronger operating profitoutlook at the passenger division, pinning its hopes on itsSCORE restructuring programme, which helped cut costs by 0.9percent over the last nine months when sales growth was flat.
Other European airlines such as Ryanair and Finnair have trimmed profit expectations, citing lower demandand the impact of volatile exchange rates, while Air France-KLM said the sharp rise in the euro against the dollar hadweighed on quarterly revenue.
The German carrier said that while advance bookings wereslightly up on the year in terms of volumes, the negative trendin exchange rates would persist.
Lufthansa is in its second year of a radical restructuringprogramme, aiming to boost operating profit to 2.3 billioneuros, up 1.5 billion from 2011. The revamp includes 3,500 jobcuts, the expansion of discount unit Germanwings, as well asoutsourcing and procurement bundling.
CAUTIOUS ON CARGO
Lufthansa Cargo, where nine-month operating profit dropped35 percent to 43 million euros, will see earnings fall again,despite early signs of market recovery for the fourth quarter.
"Given market developments in the year to date, the companyno longer expects to be able to match last year's result.Lufthansa Cargo now expects to close the year 2013 with a resultin the high double-digit million euro range," it said.
It had previously estimated this year's cargo profit wouldbe higher than last year's 104 million euros.
Air France said low growth and high oil prices meantmedium-haul and cargo activities will see a "significantreduction" in losses in 2014, without enabling them to breakeven as first hoped.
Lufthansa Finance director Simone Menne told reporters thatwhile a cargo upswing was absent in January to September, thereare signs now that cargo's pre-Christmas business had startedearlier than last year.
"We are seeing positive signs" in the cargo business ingeneral coming mainly from China and North America, she said.
Analyst Donal O'Neill of Goodbody Research said the revenuedevelopment was "a little disappointing" but understandablegiven the exchange rate movements.
"In terms of Cargo, we welcome comments that there is apick-up coming in Q4, but we are somewhat sceptical about howsustainable that is through to FY14," he said.
Lufthansa's average yield - a measure of pricing - tumbled8.2 percent in its Asia-Pacific division, where the airline has155 flights weekly. Out of that, 18 percent are to Japan, 20percent to China and 30 percent to India.
The yen has fallen about 33 percent against the euro sincelate last year, while the Indian rupee has fallen by about 24percent year-on-year as of end-September.
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