Finnair prepares for capacity and staff cuts-report

HELSINKI, June 11 (Reuters) - Finland's national carrier Finnair (FIA1S.HE) is preparing to reduce its capacity by about 2 percent initially due to the soaring cost of fuel and slowing demand and may cut jobs, its chief executive told a newspaper.

"If we will have to make a reduction that equals the level of average overcapacity in Europe, 7-10 percent, we will face staff cuts," Chief Executive Jukka Hienonen was quoted in Helsingin Sanomat as saying.

Finnair's traffic figures for May, posted on Tuesday, showed a lower number of passengers on scheduled flights, partly due to moderating demand for its flights to China and India, routes that have up to now spearheaded its growth strategy.

May's traffic figures were "gruesome", Hienonen said.

"The market cannot currently sustain our growth factor. We can no longer continue with the growth strategy we've had up to now," Hienonen told the paper.

Finnair held talks with staff on Tuesday regarding possible capacity reductions.

Finnair's total revenue passenger kilometres rose 6.3 percent in May from a year earlier, but at the same time its capacity grew 18.1 percent, resulting in a 7.3 percentage point fall in overall passenger load factor -- a measure of how well an airline fills its seats. (Reporting by Sami Torma; Editing by Louise Ireland)