"The months of April and part of May didn't go as we'd planned. If the situation doesn't improve decisively soon, we'll have to correct our earnings expectations downward," Juergen Weber, Lufthansa's Chairman of the Board, said at the company's annual shareholders meeting.

Earlier this year, Lufthansa said it expected to see net profit of around 2 billion marks ($1.07 billion) in 1999, down from the 2.5 billion marks posted in 1998.

Weber said competition on the North Atlantic route has increased because "a number of airlines moved their capacities from the Asia-Pacific area to there and ... increased their supply there by up to 30 per cent."

He added that the Kosovo conflict continues to burden the carrier, with 300 Lufthansa flights a day flying long detours in the Eastern Mediterranean.

In early trading in Frankfurt,Lufthansa's stock was down 4.2%, or 83 cents, at 18.71 euros.

In addition, Weber said the company is seeking authorization from shareholders to issue a 1 billion euro convertible bond. He said this wouldn't be necessary immediately, but he added that "our investment planning shows that our liquidity reserve will melt away in the coming years."

Analysts said they weren't surprised by Weber's comments on the airline's 1999 earnings.

"We've revised our earnings-per-share prediction down from 1.66 euros to 1.40 euros for 1999," an airline analyst at Deutsche Genossenschaftsbank said.

"It's still the best airline share in Europe, and we have it on our accumulate list," the analyst added. "However, in the short term, it could come under pressure."