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KLM and American count cost of war


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AMSTERDAM, The Netherlands (CNN) -- KLM and American Airlines have become the latest international carriers to detail the impact that war in Iraq is expected to have on their business.

Dutch airline KLM said on Friday that service cuts it announced this week would reduce its passenger-carrying capacity by 7 percent. It has already canceled flights from Amsterdam to Kuwait and Amman, Jordan. An airline spokesman said demand was falling and more passengers were canceling tickets.

KLM's move comes after Germany's Lufthansa, Swiss International Air and Finnair of Finland all reported they would lay off or stand down some staff to cut costs.

Texas-based American Airlines, the world's largest carrier, says it will cut its international flight schedule by 6 percent in response to falling ticket sales.

It is one of a host of airlines that this week has suspended flights to the Middle East or cut regular services.

American is scrambling to stave off a bankruptcy filing. It says it needs to reduce costs by $4 billion a year. The company is losing about $5 million a day and is negotiating wage cuts with unions.

In North America, Continental and Air Canada are among the carriers that have announced job cuts this week, while bankrupt United Airlines admitted it was "a distinct possibility" that it would go out of business altogether.

On the stock markets, airline shares were mostly rising on Friday as investors grew optimistic that the travel industry would not have to contend with a long war.

KLM shares were up 2.8 percent in Amsterdam -- but with airlines falling out of favor on the markets in recent months, the company's stock has lost nearly two thirds of its value since March 2002.

British Airways' shares rose 3.2% in London and Lufthansa was up 0.8% in Frankfurt. Both companies have seen their stock halve in value in the past year.


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