Shares in Lufthansa fell 11% after the carrier said it would not reach its profit targets for the next two years.
The German airline blamed competition from other airlines, which is keeping ticket prices lower on its main European and US routes, and the incursion of Middle East carriers.
A three-day pilot strike in April also wiped €60 million euros off its annual profit with bookings only returning to normal recently.
Lufthansa said it expected operating profits of €1 billion this year, against a forecast of €1.3 billion-€1.5 billion and €2 billion in 2015 against an original forecast of €2.65 bilion.
Chief financial officer Simone Menne said: “The revenue risks mentioned when we presented the quarterly figures in early May have unfortunately materialised.”
The group’s US and European business has suffered from increasing excess capacity, leading to falling prices.
“We will therefore noticeably reduce our capacities during the winter timetable period,” said Menne.
Strong capacity growth by state-owned Gulf carriers was a major concern, she added.
They are advancing ever further into the European market, also by means of investments in European airlines, she said.