ZURICH (Reuters) - The growing trend of protectionism worldwide is hampering cross-border consolidation in the airline industry, the chief executive of German airlines group Lufthansa <LHAG.DE> said on Saturday.

"To be honest I see protectionism around the world rising rather than more liberalization," Carsten Spohr said on Saturday at a Star Alliance event in Zurich, highlighting growing scepticism in Europe's free trade talks with the United States as an example.

Spohr has repeatedly said Europe's airline industry needs to consolidate to improve profits and that the airline wants to use its Eurowings budget platform as a tool for that.

Outside of intra-European activity, Lufthansa had previously invested in U.S.-based JetBlue <JBLU.O> and China's now-liquidated Jade Cargo.

Merger activity on a global level is held back by rules on foreign ownership of airlines in many countries, and Spohr said it was an issue discussed by executives at this week's IATA meeting in Dublin.

"We all met there, there were plenty of talks. We all look at each other and believe there are too many limitations. All you can do right now is a financial minority investment," Spohr said.

For example, Etihad has bought minority equity stakes in airlines around the world, and Qatar Airways holds a 15 percent stake in British Airways-owner IAG <ICAG.L>.

"In our industry there's so many limitations and regulations on what you can do outside your legal spectrum. That's the EU for us, and we don't see much progress," Spohr said.

(Reporting by Victoria Bryan; Editing by Hugh Lawson)