Aug 10 (Reuters) - Swiss duty free retailer Dufry hiked on Tuesday its 2021 savings and free cash flow guidance, citing better-than-expected cash consumption in the first half of the year.

The group now expects to achieve up to 1.2 billion Swiss francs ($1.31 billion) in savings in staff and other expenses compared to pre-pandemic levels, after having forecast in May 530 million to 670 million Swiss francs.

Signs of a recovery in some regions due to progressing vaccination around the world also drove an upgrade to Dufry's equity free cash flow objectives for 2021.

The company now estimates a monthly average of 30 million francs in cash consumption if turnover falls by 55% compared with 2019, against 40 million francs seen earlier, and a positive cash flow if turnover slides by 40%.

"We are certainly not where we want to be yet, but the high demand for travel retail and the unique shopping experience offered by our operations give us confidence", Chief Executive Julian Diaz said in a statement.

The retailer has been hit hard by pandemic-driven travel restrictions that hampered operations at more than 2,300 of its shops at airports, on cruise liners, in seaports, and other tourist locations across the world. Dufry reported underlying mid-year turnover falling 22.8% to 1.19 billion Swiss francs in the first half of the year.

However, the company's operating loss narrowed by 564.1 million francs to 368.5 million helped by "tight" cash flow management and significant costs savings, it said.

The Basel-based company added that it signed minimum annual guarantee (MAG) relief of 495.4 million Swiss francs against around 300 million in the first quarter.

The retailer expects to operate at around 85% of sales capacity by the end of August as travel restrictions are being eased and sites resume operations.

($1 = 0.9195 Swiss francs) (Reporting by Federico Maccioni and Boleslaw Lasocki; Editing by Christopher Cushing and Louise Heavens)