Political unrest in North Africa and the Japanese earthquake have dented Lufthansa’s first quarter earnings. But Europe’s largest carrier said its on-going cost cutting programme and solid demand for air travel will keep its full-year outlook on track.

“The current challenges disrupt the course of business, but do not imperil the fundamental development of the company,” Lufthansa said in its quarterly financial report today as it confirmed its full-year outlook.

Lufthansa has said the Arab uprising and the Japanese crisis has cost it €40 million in the first quarter. However it reported a narrower than expected quarterly operating loss of €227 million, compared with a loss of €330 million reported this time last year. This came despite revenue growth of 11.8 percent to €6.4 billion.

Lufthansa is seeking ways to reduce costs amid soaring oil prices, including fuel price hedging. Other measures include installing lighter seats on its planes to reduce their weight.

It said it still sees 2011 revenue and operating profit rising but chose not to give an estimate due to the uncertainty surrounding events in Japan and North Africa.

Analysts predict that the German carriers full-year operating profits could rise by as much as 30 percent, whilst revenues could see gains of 11 percent.

Earlier this week IATA said it expects air travel markets to remain depressed this quarter after growth in international air passenger traffic slowed in March.

Lufthansa said its sales in the Asia-Pacific region are currently growing despite the situation in Japan. But it is still feeling the fallout of unrest in the Middle East/Africa region.