Finnair urges Finland to prepare for M&A deals after loss

* Finnair (LSE: 0EG8.L - news) should prepare for consolidation -CEO

* CEO says Finland should scrap ownership clause

* Airline reports worse-than-forecast Q1 loss

* Shares (Berlin: DI6.BE - news) in Finnair fall by 5 percent after results

* Government says no plans to trim stake in Finnair (Adds government comment)

By Jussi Rosendahl and Tuomas Forsell

HELSINKI, May 12 (Reuters) - Finland's state-controlled airline Finnair called on the government to open the door to mergers and acquisitions on Thursday, after booking a worse-than-expected quarterly loss.

Finnair has struggled in recent years with tough competition from discount carriers, but cost savings and a focus on flights to Asia helped it swing into profit last year.

But in its seasonally slow first quarter, Finnair booked a core operating loss of 15 million euros ($17 million), below analysts' average expectation of a 3 million euro loss, prompting shares in the airline to fall by 5 percent.

Finnair said low fuel prices were not fully reflected in its results due to hedging, but that its fuel costs would fall later this year and new aircraft would help sales grow in 2016.

The company's chief executive Pekka Vauramo said Finnair needed to be ready to take part in industry consolidation and urged the Finnish government, which owns 55.8 percent of Finnair, to scrap a clause that obliges the state to hold a majority stake in the carrier.

"Finnair too should prepare for the consolidation in every way, so that the owners would be ready to make fast decisions when the time comes," Vauramo said.

"The preparation would be good to do in advance."

However, Prime Minister Juha Sipila later told reporters that the government had reviewed the issue and was not planning any changes to the ownership clause.

Several Finnish media have reported that the government has considered scrapping the clause.

A majority of Finnair's ownership must be kept in Finnish hands -- either public or private -- due to Finland's air traffic agreement with Russia. Finnair strongly relies on its Asian strategy which requires flights over Russia.

British Airways owner IAG was reported to be in negotiations over a deal with Finnair in November, although all sides denied any such talks. ($1 = 0.8759 euros) (Editing by Jeremy Gaunt and Alexander Smith)