British Airways said yesterday the outlook for airlines was "still fragile" as it and Dutch carrier KLM reported July passenger traffic figures little changed from a year earlier.

Europe's full-service carriers are being forced to cut costs and revamp operations as low-fare rivals such as Ryanair lure away both passengers and investors.

BA said its July passenger load factor, showing its ability to fill seats, fell 0.3 of a percentage point to 76.4 percent.

Sales were dented by negative publicity following a 24-hour wildcat walkout by airport staff, expected to cost up to 40 million pounds.

"We expect that revenue in the second quarter will be lower than last year," BA said in a statement referring to the July-September period.

In a theme seen across the airlines sector, BA said July traffic showed fewer passengers paying premier fares but more buying economy tickets.

Mr George Stinnes, BA's head of investor relations, said on a conference call with journalists there had been "a gently improving trend in some" of its business and first-class traffic but it still lagged levels from last year.

"We are still not at the levels that we were last year and, of course, last year's levels were well below the previous year," Mr Stinnes said.

In July, KLM's passenger volume fell three per cent, while BA's growth slowed to 2.5 per cent year-on-year, measured in revenue passenger kilometres (RPKs).

Mr Giovanni Bisignani, director-general of airlines trade body IATA, said on Monday that July results were expected to show a rebound for carriers.

But both BA and KLM said Asian routes hit earlier by the SARS virus had not yet returned to full volumes.

"Lower traffic is the effect of the aftermath of SARS, with capacity to Hong Kong still minus 22 per cent," KLM said of its slower Asia-Pacific business.

Car rental firm Avis Europe, which relies on airports for half of its revenues, is forecasting a rebound in European airlines traffic in this quarter. -