FRANKFURT (Reuters) - German airline Lufthansa's <LHAG.DE> cargo unit said on Friday it will cut up to 800 jobs, out of a worldwide workforce of around 4,600, saying it needed to reduce costs to remain competitive.

Lufthansa Cargo said the plan to ax 700-800 jobs would help it cut costs by 80 million euros ($90 million) a year, but did not say when that would start to take effect. Up to 500 of the job cuts would be in Germany, it said.

The International Air Transport Association last week lowered its growth forecast for air freight demand in 2016 to 2.1 percent, from a previous prediction for 3 percent growth, due to weak global GDP and trade growth.

Freighter fleets are also increasingly competing with passenger planes as new planes offer more space in their holds for cargo.

Lufthansa expects profits at its cargo arm will drop significantly this year from 74 million euros ($83 million) in 2015. It has already grounded two MD11 freighters in response to lower market demand, leaving it with five Boeing 777F and 12 MD-11 planes in service.

(Reporting by Victoria Bryan and Ludwig Burger; Editing by Susan Fenton)