* Pilots extend two-day strike to long-haul flights
* 1,511 flights cancelled, around 65 pct of services
* Lufthansa shares down on fears for profit
* Walkouts hit start of school holiday in German states (Recasts, adds comment from union, Lufthansa CFO, cancellations of long-haul flights)
By Peter Maushagen
FRANKFURT, Oct 20 (Reuters) - German pilots raised the pressure on Lufthansa management in a dispute over retirement benefits, widening a two-day strike to include long-haul flights that are among the airline's most profitable.
The Vereinigung Cockpit (VC) union called on pilots on long-haul routes to walk out between 0400 and 2159 GMT on Tuesday, coinciding with a two-day stoppage on short-haul flights that began on Monday.
The action is the eight pilots' strike to hit Lufthansa this year and adds to misery for travellers in Germany where millions were left stranded after train drivers had refused to work over the weekend in a separate dispute.
The strikes coincided with the start of week-long school holidays in a number of German states.
Lufthansa cancelled 1,511 flights for Monday and Tuesday - equivalent to 65 percent of services - as a result of the strike, including nearly all long-haul flights from Frankfurt, its main hub and Europe's third largest airport.
Lufthansa shares fell by as much as 2.5 percent on Monday, as analysts worried the strikes could force Lufthansa to cut its profit target for the second time this year.
DZ Bank analyst Dirk Schlamp estimated the series of eight strikes would cut Lufthansa's earnings before interest and tax (EBIT) by 80-90 million euros ($102-115 million) this year.
"A solution, however, is not yet apparent. Therefore, further strikes are possible," Schlamp said.
The strikes come as the national airline is trying to expand low-cost operations that will allow it to compete more effectively with budget carriers such as Ryanair and easyJet on short-haul European routes.
Air France-KLM, another European airline trying to cut its cost base to compete with budget rivals, said a two-week strike by its pilots in September would cost it up to 500 million euros.
Lufthansa said it could not understand why the union was not willing to compromise in the pensions dispute.
"The strikes are not only causing significant financial damage but are also damaging our image, the consequences of which are significant and not yet clear," Lufthansa Chief Financial officer Simone Menne said in a statement.
The pilots remained unmoved by such pleas.
"We are extending the strike in order to send a clearer signal. Perhaps now, Lufthansa will finally come round," VC board member Markus Wahl told Reuters.
VC, representing about 5,400 Lufthansa pilots, is fighting to keep a scheme that allows pilots to retire at the age of 55 and still receive up to 60 percent of their pay before regular pension payments start at 65. The union has proposed a plan to cover the costs of the scheme.
Lufthansa said it was trying to divert passengers via hubs in Zurich, Vienna and Brussels, served by its brands Swiss, Austrian Airlines and Brussels Airlines which are not affected by the strike. It has also reserved 3,800 hotel rooms for passengers left stranded. (1 US dollar = 0.7846 euro) (Additional reporting by Ludwig Burger and Victoria Bryan; Editing by Keith Weir)