Europe’s largest airline, Air France-KLM has issued a stark profit warning, whilst also disclosing that it has dropped into the red for the current financial year.The aviation giant has said its operating loss is running at around €200m for the past 12 months and warned that the outlook appears similarly bleak for the forthcoming year.

Air France-KLM is to cut as many as 1,200 jobs after weak ticket revenues and dwindling cargo volumes forced a sharp rise in third-quarter losses to €200 million.The Franco-Dutch group unveiled a cost-cutting programme of €1.2 billion. The job cuts, which will include some 450 managers, will be through natural attrition and no one will be fired, spokesman Nicolas Petteau promised.

Overall, seat capacity for the Air France KLM Group is to increase by 5.2% in the forthcoming 2007/2008 winter season compared to the same season last year, rising 6.2% in the long-haul network and 1.8% in the short and medium-haul network.