Europe's biggest airline, Air France-KLM, plans to reduce seating capacity on its flights by 2 percent during the winter season to lessen the impact of falling demand.

Capacity for the period beginning Oct. 25 will be 1.8 percent lower than a year ago on long-haul services and down 2.9 percent on medium-haul networks, the carrier said on Monday.

In a very difficult economic context which has led to a sharp decline in the demand for premium classes, the Air France schedule for winter 2009 reflects the decrease in capacity initiated last winter, the airline said in a statement.

Air France, whose main hub is at Charles de Gaulle airport in Paris, is extending cuts to domestic capacity made during the summer to the winter season. The carrier said it was already preparing capacity changes for next summer.

Frequencies from Paris-Charles de Gaulle will be adjusted on the busiest routes, without impairing the quality of connections with long-haul flights, so as to use larger capacity aircraft which are more cost-efficient, the airline said.

The International Air Transport Association trade group earlier this month predicted the world's airlines would post $11 billion in losses this year as weak passenger and cargo demand puts pressure on revenue.

Air France-KLM's capacity cuts follow rivals such as Spanish airline Iberia and Finland's Finnair Oyj.

(Reporting by James Regan; Editing by Dan Lalor)

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