UPDATE 1-Air France-KLM weighs temporary lay-offs

* Air France-KLM does not rule out temporary lay-offs

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PARIS, July 9 (Reuters) - Air France-KLM (AIRF.PA) said on Thursday it may impose temporary lay-offs or part-time working as it faces a continued slump in traffic.

Europe's largest airline by sales said it saw no sign yet of a recovery in travel demand, though it has said there are signs a severe downtiurn in passenger and cargo demand has stabilised.

"Air France-KLM must remain competitive. I haven't excluded temporary layoffs. We will watch very closely. These measures should allow us to avoid affecting employment," Chief Executive Pierre-Henri Gourgeon said.

He reiterated that the airline does not plan full-scale compulsory lay-offs.

In May Air France-KLM said it planned 3,000 job cuts in the financial year to end-March 2010 through natural wastage.

A French newspaper reported in June that the airline plans a further 3,000 job cuts.

In a radio interview last month, Gourgeon declined to say whether the airline could resort to temporary lay-offs.