* Plan to cut 90 mln euros in costs at Austrian Airlines
* Route, fleet changes planned at Brussels Airlines
* Cabin crew launch two-day strike over pay
* CEO says prepared for arbitration
* Shares up 6.7% (Adds CEO comment on arbitration, updates shares)
BERLIN, Nov 7 (Reuters) - German airline Lufthansa announced plans on Thursday to cut costs at its Austrian Airlines, Brussels Airlines and Lufthansa Cargo businesses to revive profits but faces a fresh challenge to its efforts with a cabin crew strike this week.
Lufthansa has reacted to competition from Ryanair and easyJet by cutting costs and announcing a turnaround plan in June for Eurowings, which it said on Thursday was paying off as it reported better-than-expected quarterly figures.
Lufthansa shares, which have fallen 16% in the last year, were up 6.7% at 0845 GMT, making them the biggest gainer on the German blue-chip index.
But it faced a fresh blow on Thursday when cabin crew launched a two-day strike over pay and pensions that will result in the cancellation of 1,300 flights and affect 180,000 passengers. A spokesman said the costs of the strike could not yet be estimated.
Trade union UFO has called for the walkout on what amounts to one in five of the carrier's planned 6,000 flights on Thursday and Friday.
Chief Executive Carsten Spohr said on Thursday he was prepared to enter into arbitration talks with all three unions that represent cabin staff, including UFO. Lufthansa and UFO have been at odds for months over the union's legal status.
Lufthansa said quarterly adjusted earnings before interest and taxation (EBIT) fell 8% to 1.3 billion euros, ahead of average analyst forecasts for 1.2 billion euros, while revenues rose 2% to 10.2 billion euros, also ahead of consensus.
On Thursday, it said slower growth at its competitors was helping to counter pricing pressures in Europe.
Lufthansa said the Eurowings plan was showing first results and it should achieve a margin of 7% in the longer term.
Lufthansa said it would seek additional annual cost savings at Austrian Airlines of 90 million euros ($100 million) by the end of 2021 that would include staff cuts, closing decentralised bases to focus on its Vienna hub and standardising its fleet.
A company source said the plan could involve the loss of around 500 jobs. Lufthansa declined to comment.
"In an increasingly challenging market environment, it is more vital than ever that we consistently take every action within our influence and further reduce our costs," said finance chief Ulrik Svensson.
"We have resolved several further measures to improve the performance of our only modestly profitable and even loss-making companies," he said.
Lufthansa said it would make changes to the route network at Brussels Airlines, streamline its administration and standardise its fleet.
It will cut the size of the fleet at Lufthansa Cargo, withdrawing all 10 Boeing MD-11 freighters by the end of 2020, and adding two Boeing 777Fs to the seven it already uses.
($1 = 0.9041 euros) (Reporting by Emma Thomasson and Ilona Wissenbach; Editing by Michelle Martin and Elaine Hardcastle)