Airlines have cut back flights as demand slumps, but not quickly enough to avoid financial loss, the Association of European Airlines said. All but three of its member airlines-most of them national carriers-reduced capacity in May, it said.

Early figures for June are "just slightly less gloomy," it said, with passenger numbers falling around 7.5 percent in the first half of the month compared to last year.

Lufthansa AG, Europe's biggest airline, posted a 6.6 percent drop in passenger numbers from a year ago. Air France was down 7.4 percent and British Airways PLC was down 7 percent. Smaller airlines serving vacation destinations saw sharper drops: Greece's Olympic Airlines was down 26.3 percent.

Globally, airlines expect to lose $9 billion this year.

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