Shares in Air France-KLM fell as much as 7.3 percent at the start of trading on Friday after Europe's largest airline warned of a EUR200 million euro (USD$271.4 million) operating loss in its financial year ending March 31.

Air France-KLM ditched its forecast for an operating profit in 2008/09 after being hit by falls in traffic, lower average revenues for passengers and cargo and redundant hedges for high oil prices.

"While this announcement is almost certainly the last of the negative news for the share, we do not expect news flow to improve before end-April, and the first positive catalyst is likely in mid-May with the announcement of the extension of the cost-cutting program," a trader said.

The warning came as the head of US engine maker Pratt & Whitney warned of "significant" further layoffs in the face of slackening airline demand.