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* Cuts 2014, 2015 profit targets
* Shares down 14 pct
* New CEO to present restructuring measures in July
* Will review capex plans, plane orders
* Has over 200 planes on order from Airbus, Boeing (Adds plane orders details, analyst comment, links)
By Victoria Bryan
FRANKFURT, June 11 (Reuters) - Lufthansa cut backits profit targets for the next two years on Wednesday citingcompetition from Middle East and low-cost rivals, sending sharesof Europe's biggest-selling airline plunging.
The warnings surprised investors after better-than-expectedresults in May and come just over a month after new chiefexecutive Carsten Spohr took charge.
Spohr will now set out fresh restructuring plans next month,and the German airline will review its spending plans, includingthe possible cancellation or deferral of plane orders fromAirbus or Boeing, Finance Chief Simone Mennetold analysts and reporters.
Lufthansa cut its forecast for 2014 operating profit to 1billion euros from a forecast of 1.3-1.5 billion and lowered its2015 earnings target to 2 billion euros from 2.65 billion.
Europe's largest airline by revenue said it was sufferingfrom competition on European flights as well as on routes acrossthe Atlantic where demand from business travellers hastraditionally delivered healthy operating margins.
"The main reason for this lower forecast is significantlyweaker than expected revenue development in the passenger andfreight businesses compared to what we anticipated at thebeginning of the year," Menne said.
"There is overcapacity in the North Atlantic," she said,noting Lufthansa was feeling the heat especially from Gulfcarriers Emirates, Qatar Airways and Etihad, and fromlow-cost airlines, such as easyJet and Ryanair.
"The extent of the warning is comparatively big. It'sespecially disappointing that the target for 2015 was alsoreduced," DZ Bank analyst Dirk Schlamp said.
Lufthansa shares were down 14 percent as of 1443 GMT,shedding almost 1.5 billion euros ($2 billion) in market valueand poised to mark their biggest ever one-day drop.
The warning dragged down European rivals too, with AirFrance-KLM down 7 percent and British Airways ownerIAG off 3 percent.
PRICING PROBLEMS
"We had hoped that the pricing weakness was temporary,"Menne said, referring to overall trends at the group. "But Mayshowed negative pricing year on year and for forward bookings inJune and July we see unit revenues are clearly behind lastyear's figures."
RBC analyst Damian Brewer said the airline had been the mostaggressive in terms of raising seat capacity this summer eventhough the German economy is not growing as fast as others.
"IAG are growing but also the UK economy is heading towards3 percent GDP growth, not 1 percent or so as is the case inGermany," he said.
Lufthansa intends to increase capacity by 7.4 percent onNorth American routes this summer, Menne confirmed.
She said the cargo business would now likely post a profitonly slightly above last year's 77 million euros, rather thanthe significant jump hoped for. Here too, Lufthansa is losingout to Gulf carriers.
NEW CEO
Already in the midst of a major restructuring programmedubbed Score, Menne said the company remained on track to reduceunit costs by 4 percent this year.
Menne said the airline, which is spending billions onupgrading business class seats and a premium economy class tocatch up to rivals, will cut the number of seats it offers inwinter and possibly next year.
She also said Lufthansa will review its capex plans,including looking at options to potentially delay or cancelcurrent plane orders.
Lufthansa has 261 planes on order with a list value of 32billion euros which are due for delivery by 2025. Of the total,178 are Airbus aircraft while 53 are on order from Boeing.
Any order cancellations would deal another blow to Airbusafter Emirates on Wednesday scratched a $16 billion order forthe A350 airliner.
Lufthansa, Airbus' biggest customer and operator, committedto buy 25 A350s last year with options to take a further 30 in adeal worth up to $16 billion at list prices.
Christoph Niesel, a fund manager at Union Investment, one ofLufthansa's 15 largest shareholders, said the profit warningsignalled that both internally and externally there were a lotof challenges to meet.
"But with the new targets, Lufthansa even has room tosurprise on the positive side," Niesel said.
($1 = 0.7345 euros) (Reporting by Victoria Bryan and Peter Maushagen; additionalreporting by Sarah Young and Sabine Wollrab; editing by LudwigBurger and Jason Neely)
