Continental Airlines Inc said on Friday it had temporarily reduced service to Mexico, citing lower demand as a deadly strain of flu spreads.

In a statement, the carrier said it would cut by about 50 percent its capacity to Mexico, which has reported 176 deaths from the new strain of Influenza A (H1N1) -- originally called swine flu.

The changes are effective Monday. Continental added that it would reduce flight departures by about 40 percent. The carrier said the reductions amount to about 2 percent of its systemwide capacity for May, compared with its original schedule.

Continental is the first major U.S. carrier to curb service to Mexico amid the spread of swine flu, which has reached at least 13 countries including the United States, Germany, the Netherlands and Hong Kong.

The World Health Organization says experts do not yet know enough about the new flu strain to say how deadly it is and how long any potential pandemic may last.

Other U.S. airlines have not cut service. AMR Corp , parent of American Airlines, and US Airways Group said they were closely watching the situation. But some global carriers have already reduced links.

Air Canada said it was temporarily suspending operations to popular resorts like Cancun and Puerto Vallarta, and Spain's Air Europa said it would cut charter flights.

DOCTORS ON PLANES

Germany's Deutsche Lufthansa announced contingency plans to cut flights and drop routes amid the crisis, and said it would place doctors on its planes to Mexico in hopes of detecting any flu infections early.

The International Air Transport Association (IATA) warned earlier this week that the flu outbreak would compound financial problems for airlines, which are struggling as the global recession depresses travel demand.

Continental, which earlier this week had noted a significant drop in travel to Mexico, said it was using smaller aircraft on flights to Mexico or reducing the frequency of flights to certain cities. Prior to these reductions, Continental said it operated an average of 450 weekly flights to the country.

We were already experiencing soft market conditions due to the economy, and now our Mexico routes in particular have extra weakness, Continental Chief Executive Larry Kellner said in a statement.

Continental offers more seats than any foreign airline into and out of Mexico, according to data provided exclusively to Reuters by airline schedules consultant Innovata.

Earlier this week, cruise operators Carnival Corp and Royal Caribbean Cruises Ltd said they were temporarily halting port calls by their vessels in Mexico.

Shares of major U.S. airlines were higher in trading on Friday. Continental was up 1.7 percent, Delta Air Lines rose nearly 4 percent and AMR gained 3.4 percent.

(Reporting by Karen Jacobs; Additional reporting by Tim Hepher in Paris and Kyle Peterson in Chicago; Editing by Brian Moss)

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