FRANKFURT (Reuters) - Pressure on ticket prices, tourist caution after attacks on European cities and cargo weakness prompted Lufthansa (>> Deutsche Lufthansa AG) to cut growth plans for the year, weighing on its shares.

The German airline will increase overall flight capacity by 6 percent this year instead of 6.6 percent, it said on Tuesday, with Chief Financial Officer Simone Menne adding that it is evaluating whether more reductions are needed.

British Airways owner IAG (>> International Consolidated Airlns Grp SA) last week said it will offer fewer flights than initially planned this summer because people are flying less after the Brussels attacks.

Lufthansa's Menne said economic weakness in South America has contributed to pricing pressure that has been compounded by reduced demand among travellers from China and Japan as well as tour groups from North America after the attacks on Paris and Brussels.

"The trends are more pronounced than we had expected a few weeks ago," she told analysts after the group reported a first-quarter operating loss of 53 million euros (41.53 million pound), narrowing from 167 million euros in the same period last year thanks to low fuel and cost reductions.

Revenue per passenger per mile fell 5.4 percent in the quarter, also burdened by the start of long-haul flights by its Eurowings budget carrier.

Menne said that sector-wide capacity cuts are unlikely to be deep enough to compensate for the falling passenger yields but expects a pick-up in bookings as holidaymakers make belated travel decisions as the summer holiday season draws closer.

The group cut its forecast for the cargo business and is reviewing operations that have been hit by overcapacity because of the availability of additional cargo space on passenger aircraft worldwide.

Lufthansa shares dropped by more than 7 percent to a two-and-a-half-month low as analysts expressed concern over its ability to hit 2016 targets.

The company expects 2016 earnings before interest and tax to improve slightly on last year's 1.8 billion euros. The consensus forecast among analysts polled by Reuters was for 1.9 billion euros.

CFO Menne said the group had reached a turning point on unit costs that shrank by 4 percent in the quarter, excluding fuel and currency. Lufthansa has been trying to reduce costs to compete more effectively with budget carriers in Europe as well as Middle East long-haul rivals.

Liberum analyst Gerald Khoo said that progress on cost cuts has been too slow and that capacity growth remains uncomfortably high given the current economic backdrop.

(Editing by Maria Sheahan and David Goodman)

By Victoria Bryan