CORRECTED - WRAPUP 1-European airlines report more weak traffic

(Corrects paragraph 5 to show Lufthansa is due to report on Thursday not Wednesday)

* Air France-KLM June traffic down 7 pct

* 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 (AIRF.PA), 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. [ID:nL7613306]

Germany's Lufthansa (LHAG.DE) 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. [ID:nL2198823]

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