Citing the "deterioration in the economic environment," Europe's largest airline, Air France-KLM, said on Tuesday that it would probably incur operating cost losses for the last quarter of 2008. Earlier, in the period July-September, it had reported plummeting profits bogged down by higher oil prices and financial charges, which axed its earnings.

The fiscal third quarter sales at Air France-KLM suffered a blow due to the ongoing economic crisis, which brought about lesser passenger traffic revenues as well as a substantial fall in cargo revenue. Even the benefit of a drop in oil prices could not be fully availed by the carrier due to the negative impact from its existing hedging agreements.

Following the pre-market announcement, the shares in Paris trading dropped to euro8.51 on Monday, marking a 3.1 percent fall; with the carrier's share price registering an
8 percent drop.

The parent company of the French and Dutch carriers said that though its third quarter operating profit would likely be negative, "the operating income for the financial year
2008-09 as a whole should remain positive, but its level will depend on how the economic situation evolves in coming weeks."

A couple of months back, Air France-KLM dumped its operating profit objective of euro1 billion for the 2008-09 fiscal year; reiterating, at the same time, that it would remain "clearly in profit."