KLM expects to post a loss for the full year in the "hundreds of millions of euros" blaming falling passenger traffic after the September 11th attacks.
The Dutch airline said its profits at the interim stage have fallen 65 per cent to £65.6 million from £186.3 million in the same period last year.
KLM's chief financial officer, Mr Rob Ruijter said that sales are falling more sharply than it can cut costs. The company hopes to reach short-term code sharing agreements in Europe this month to cut its overheads and is in talks with British Airways.
It has already cut capacity by 15 per cent and laid off 2,500 full time workers, 9 per cent of its worldwide staff of 28,000.
Mr Ruijter said the airline will also consider further job cuts if conditions don't improve.
He dismissed questions about potential bankruptcy, saying KLM is "financially solid" and has reserves that will last for "at least a year."
Sales in the six-month period from April to September fell 3 per cent to £1.15 billion from £1.18 billion.
But the company said it has incurred losses of at least £30.9 million in the weeks after the attacks in New York and Washington.
If overall market conditions and passenger traffic continue to drop, KLM said, it will make additional cuts in its service.
PA