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Finnair has announced it will cut services and begin negotiations on 500 job losses following a significant fall in demand.

The Finnish carrier will be one of the first in Europe to cut back as a result of the record fuel price, following significant cuts across the industry in the US.

Finnair recently issued a profit warning and traffic figures for May showed the proportion of seats sold at 65%, compared with 72% a year ago.

A Finnair spokesman said: "Demand has decreased and this has accelerated at such a rate in past weeks that, together with the price of fuel, Finnair's profit-making capability has significantly weakened."

Finnair operates from Heathrow and Manchester to Helsinki, with onward flights to China, Japan, South Korea, Thailand and India. It is a code-share partner of British Airways and member of the airline alliance Oneworld. No details of route reductions are available, but the carrier said cuts would affect "all traffic types".

A spokesman said: "Demand has dropped especially on Chinese routes and on European and domestic traffic."

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