Lufthansa has today lowered its full-year capacity forecast as hopes dwindle for an early summer travel rebound, but the German airline's cost-cutting drive narrowed quarterly losses.

The group said today it expected to fly at about 40% of its pre-pandemic capacity, trimming the 40%-50% guidance issued less than two months earlier.

The airline also includes Austrian Airlines, Swiss and Eurowings.

Lufthansa said it expected a gradual demand pick-up in April and June and a "significant market recovery" in the second half, citing moves by the European Union towards opening up transatlantic travel to vaccinated US visitors.

"We know that bookings shoot up wherever restrictions are loosened and travel becomes possible again," chief executive Carsten Spohr said in a statement.

The travel industry has suffered many false starts to a longed-for recovery, beset by new restrictions, virus variant outbreaks and a sluggish European vaccine rollout.

Lufthansa's adjusted loss before interest and taxes (EBIT) narrowed by 30% to €1.14 billion in the first quarter, helped by a 19% workforce reduction and 51% decline in operating expenses.

The airline's net loss halved to €1.05 billion.

Both numbers beat expectations, based on the median analyst estimates in company polling. Free cash flow came in at a negative €235m a month, also better than the monthly €300m cash burn previously flagged.

The cargo business - a bright spot for crisis-hit airlines as grounded passenger jets squeeze capacity and boost prices - set a €314m operating profit record in the quarter.

Lufthansa has pledged swift progress in paying down debt from a €9 billion government-backed bailout last year and will seek approval at a May 4 shareholder meeting to raise up to €5.5 billion in new capital.

Net debt rose by €1 billion over the first quarter to €10.9 billion at March 31, it said.