UPDATE 1-Air France-KLM traffic falls in July

* Passenger traffic down 3.3 pct in July

* Load factor 85.1 pct

* Shares closed 3.40 pct higher before data released

PARIS, Aug 6 (Reuters) - Air France-KLM (AIRF.PA) said on Thursday passenger traffic fell 3.3 percent in July while its load factor rose 0.7 points to 85.1 percent as it reduced capacity by 4.1 percent.

The airline said in a statement the decline in passenger traffic followed a 5.8 percent drop in the first quarter. It carried 6.9 million passengers in July.

The group's cargo business showed a 17.2 percent decline in traffic, while capacity was cut by 17 percent, leaving a stable load factor of 64 percent.

"This data confirms the trend towards a stabilisation in the cargo activity, with a progress adjustment of capacity to demand," Air France-KLM said in a statement.

(Reporting by Helen Massy-Beresford; Editing by David Cowell)