* Lufthansa CEO says carrier should not be a bystander
* European airline industry more fractured than U.S.
* Shareholder says Lufthansa needs to focus on itself
* Monarch says eyeing acquisitions (Adds comments on consolidation, investor reaction, Monarch)
By Peter Maushagen
HAMBURG, Germany, April 28 (Reuters) - German airlineLufthansa wants to take part in much-needed industryconsolidation in Europe so carriers can compete better with U.S.and Asian rivals, Chief Executive Carsten Spohr said onThursday.
Spohr told an annual shareholders meeting in Hamburg onThursday that the five largest airlines in the United Stateshave an 80 percent share of the market, while in Europe the topfive have just 40 percent.
"Consolidation is a part of what needs to happen in Europein order to make the sector more competitive when compared tothe United States and Asia," Spohr said.
"As Europe's largest airline, we want to take part inconsolidation, not just be a bystander," he told investors.
Lufthansa said late on Wednesday it was looking at ways tobring part-owned Brussels Airlines under its low-cost Eurowingsbrand, though the Islamic State attacks in Brussels have pushedback the deadline for a decision to August.
Sources have also told Reuters that Lufthansa is consideringpartnerships, or even takeovers, of Scandanavian carrier SAS and Condor, the airline that belonged to Lufthansa fordecades before being bought by Thomas Cook.
Lufthansa is already one of the few European airlines tohave driven merger activity in the region, snapping up Swiss,Austrian and bmi several years ago.
But the restructuring of Austrian proved time consuming,while Lufthansa eventually sold British Midland to BritishAirways parent IAG in 2012, meaning not allshareholders are in favour of further merger forays.
"The desire for size has not always suited Lufthansa," IngoSpeich, portfolio manager at shareholder Union Investment, toldthe meeting.
"Instead of casting an eye over Brussels, Condor or SAS,Lufthansa should invest the capital into its balance sheet,restructuring and renewing its fleet," Speich said.
IAG too has been on a buying charge, adding Vueling and AerLingus to a stable that started with British Airways and Iberia.
British holiday carrier Monarch said on Thursdayit was considering acquisitions too, while Qatar Airways said onWednesday it had increased its stake in IAG to 12 percent.
But several analysts and sector bankers have told Reutersthey feel there are few major deals to be done, with small dealsor cooperation agreements instead more likely.
Ryanair, set to overtake Lufthansa as Europe'slargest carrier this year in terms of passenger numbers, hasalso said it prefers to grow organically, while Air France-KLM is grappling with a restructuring. (Additional reporting by Victoria Bryan in Berlin and SophieSassard in London; editing by Ludwig Burger and David Clarke)