(Corrects paragraph 5 to show Lufthansa is due to report on Thursday not Wednesday)
* Air France-KLM June traffic down 7 percent
* Cargo declines stabilised, airline says
* Lufthansa seen reporting similar drop in passenger traffic
By Tim Hepher and Marie Maitre
PARIS, July 7 (Reuters) - European airlines reported little respite from the economic gloom hampering passenger air travel on Tuesday, but June data again suggested a slump in cargo traffic had stabilised.
Air France-KLM, Europe's biggest airline by revenues, said capacity cuts failed to keep up with a drop in demand as passenger traffic volumes fell 7 percent.
"As in previous months, unit revenues were weak," the airline said, prompting investors to push its shares down over 2 percent even though traffic was broadly in line with forecasts.
The Franco-Dutch group said it carried 6.37 million passengers in June while its capacity was cut by 5 percent and its passenger load factor -- the proportion of seats it sold -- fell 1.1 percentage points to 80.3 percent.
Germany's Lufthansa is also expected to report a drop of some 7 percent in June passenger traffic on Thursday.
Air France-KLM said cargo traffic fell 17.2 percent on a like-for-like basis in June but that this had stabilised since the beginning of its financial year in April.
With protectionism on the rise in the face of recession, G8 leaders meeting in Italy this week are expected to urge countries to avoid measures that restrict trade.
A larger group of countries that met for G20 talks in London earlier this year agreed a package of measures to unblock trade financing blamed for the sharp downturn in air and sea volumes.
COST CUTS
Air France-KLM, still in a state of shock following the worst crash in its history, over the Atlantic on June 1, is due to hold a shareholders' meeting on Thursday.
The airline posted a narrower-than-expected fourth-quarter loss but scrapped its dividend as it waits for a recovery that rival British Airways has said could be some way off.
BA, currently locked in talks with unions in a desperate bid to wring cost cuts from staff, said on Friday it carried 3.8 percent fewer passengers in June than in the same month last year, including a near 15 percent fall in premium traffic.
However, the company said long-running falls in traffic had stabilised in recent months, while Irish budget airline Ryanair reported its latest rise in passenger numbers -- up 13 percent for June to 5.84 million.
Low-cost airlines are performing relatively well compared to traditional network rivals since they are not exposed to the weak premium sector and have little involvement in cargo, which has slumped this year in line with a dive in world trade.
On Monday, Britain's easyJet said June passenger numbers edged up 0.8 percent to 4.15 million.
German low-cost carrier Air Berlin said on Tuesday it had boosted its yields -- the industry's main yardstick measuring average revenue per mile per customer -- by 14 percent in June as it cut back capacity to address a drop in traffic.
Germany's second-biggest airline, after Lufthansa, transported 5.8 percent fewer passengers in the first half of the year. Its shares rose 1.2 percent.
Scandinavian airline SAS saw its passenger traffic fall 14.1 percent in June but its load factor was unchanged from the same month the previous year.
Finnair also said demand declined in June, with passenger volumes falling 13.4 percent, but it more than compensated by taking seats off the market. (Additional reporting by Veronica Ek, Marilyn Gerlach, Michael Shields; editing by Simon Jessop)