BERLIN (Reuters) - Lufthansa (>> Deutsche Lufthansa AG), Europe's largest airline by revenue, reported lower than expected second-quarter profit as ticket prices fell on North American, Asian and European routes and strike action weighed.

"We are not happy with the second quarter ... We have a lot of catching up to do in the summer," Chief Financial Officer Simone Menne told journalists on Thursday.

Lufthansa and rival Air France-KLM (>> AIR FRANCE-KLM) have been struggling to cope with increased competition from low-cost rivals in Europe and Gulf carriers on long-haul routes, leading both to warn on profit over the last eight weeks.

In response, the two have announced plans for more low-cost operations, to

"We want to target a price segment and customers that we didn't previously," Menne said.

Lufthansa's second-quarter operating profit was 359 million euros (284 million pounds), far below analyst expectations for 416 million, according to a Reuters poll.

In the first half, strikes wiped off 60 million euros from profit in its core passenger airlines business. Yields - a measure of pricing - were down 2.6 percent adjusted for currency effects in the second quarter, extending falls of 1 percent in each of the previous two quarters.

The German carrier also took a provision for its Austrian Airlines unit after the European Court of Justice in June advised judges to rule that old Austrian Airlines collective wage agreements, which Lufthansa wants to cancel, are valid until a new one is agreed.

DZ Bank analyst Dirk Schlamp said he estimated the provisions in the double-digit million euro range.

Despite that, Lufthansa maintained a forecast for a full-year operating profit of around 1 billion euros and 2015 profit of 2 billion.

CAPACITY PLANS

After hitting 20.27 euros in April, their highest level since late 2007, Lufthansa shares have tumbled since the profit warning in June. They trade at 7.3 times expected earnings, compared with 10.5 times for Air France and 14.2 for Ryanair.

Lufthansa shares were down 3.9 percent at 13.77 euros at 0713 GMT (8.13 a.m. BST), against a 0.2 percent lower Dax <.GDAXI>. Air France and IAG were down 0.8 and 0.6 percent, respectively.

"The numbers were weak, especially in the passenger airlines unit," Bankhaus Metzler analyst Juergen Pieper said. "The good news is that the outlook was kept."

The new CEO of Lufthansa, Carsten Spohr, has said the group will now only increase the amounts of seats it offers this winter by 2 percent instead of a planned 4 percent.

The airline said it expects markets to remain weak in the second half, though the capacity cuts should ease the pressure compared with the first half.

However, Ryanair said earlier this week that it would be raising winter capacity by 8 percent, indicating no let-up on pricing for European carriers.

Ryanair said increasing capacity would put pressure on fares, and that it expected yields to fall by between 6 and 8 percent in the second half of its financial year, giving a 2 percent rise for the year as a whole.

"I think that will be tough for other airlines to deal with," Investec analyst Gerard Moore said after the Ryanair results and capacity plans were announced.

CFO Menne also said Lufthansa was looking at capacity plans for 2015 but would not give any concrete details.

(Reporting by Victoria Bryan; Editing by Maria Sheahan and John Stonestreet)

By Victoria Bryan