KLM remained healthy until recently

Dutch KLM, Europe's fourth-largest airline, has posted a record loss, and warned that the weak economy and the Sars virus threatened to keep the outlook grim for the foreseeable future.

The airline lost 416m euros (�296m; $473m) during the year to end-March, slightly worse than the already gloomy expectations of analysts.

KLM was long seen as one of Europe's most robust airlines, and had shown signs of recovery in recent months.

But the combination of persistently slow global growth and travellers' fears over the war in Iraq and Sars forced the carrier to warn of a deterioration earlier this year.

KLM shares slid as much as 5% on the news.

Cutting costs

KLM reiterated its plans to launch a major cost-cutting drive, including cuts of up to 10% in its workforce.

Alongside other measures, this could cut annual expenses by 650m euros, KLM hopes.

"The current industry environment is unprecedented and we believe that the revenue environment has permanently changed," said KLM chief executive Leo van Wijk.

"Our yields are decreasing and our cost base does not currently compensate for this development.

"We must therefore work hard... to reduce our cost base."