By Essi Lehto

HELSINKI (Reuters) -Finnair posted another quarter of steep losses on Tuesday after most of its planes remained grounded by the COVID-19 pandemic but is hopeful for improving demand in the coming months.

As vaccinations continue and countries look to remove travel restrictions, Finnair Chief Executive Topi Manner expects the aviation sector’s recovery to gather pace later this year.

“Demand will start to recover significanty later in the summer. Customer surveys have long showed signs of pent-up demand,” Manner told Reuters.

Shares in the Finnish flag carrier were up 5.3% at 0.78 euros in late morning trading.

The company reported a quarterly operating loss of 149.1 million euros, deepending from the 95.6 million euro loss a year earlier. However, the result was slightly better than the 159.8 million euro loss expected by five analysts, Refinitiv Eikon data showed.

Finnair this month said that March passenger numbers were down 83% year on year to 86,000. That leaves cargo accounting for more than 50% of the company’s revenue, CEO Manner said in a statement.

“Cargo demand was supported by supply chain challenges caused by the pandemic,” he said, noting that the situation was exacerbated when a giant container ship blocked the Suez Canal trade route last month.

The airline said it expects an operating loss of similar magnitude in the second quarter but would seek additional cost savings in areas such as real estate, administration and salaries.

Finnair raised its annual cost savings target by 30 million euros to 170 million euros.

In March the European Commission authorised a 351 million euro loan from the Finnish government to compensate for Finnair’s losses during the pandemic.

Finland, which holds a 55.9% stake in Finnair, has also participated in a share issue and granted a 90% pension loan guarantee.

Other Nordic airlines have also been shoring up their finances. SAS has secured a rescue package from its main owners, Sweden and Denmark, while Norwegian Air plans to increase its debt to ride out the pandemic

($1 = 0.8282 euros)

(Reporting by Essi LehtoEditing by Kirsten Donovan and David Goodman)