British Airways reports profits rise

British Airways (BA) have seen an increase in passenger numbers that have helped to boost profits.

In the three months to the end of December, BA reported an 8% rise in pre-tax profits of £164 million.

Willie Walsh, British Airways' Chief Executive, said: "These are encouraging results which reflect better revenue and the continued efforts of our people to strengthen the business.

"Revenue is up 8.8 per cent, driven by strong traffic volumes particularly in the premium cabin. Increased volumes have been achieved through significant promotional activity."

But BA's drive to reduce operating costs and increase margins has been affected by rising fuel costs.

Mr Walsh said: "Total costs are up by 7.3 per cent but we have initiatives underway to reverse the trend, such as management reductions, changes to working practices, reduced absenteeism and restructuring unprofitable parts of the business.

"Tackling our pension deficit is a major part of making our cost base more competitive. We have come to the end of a staff awareness programme on the implications of the significant deficit and we are reviewing the feedback before starting consultation with the trades unions and trustees by the end of March."

BA recently launched new services to Bangalore and Shanghai both of which it said had performed "ahead of target."

The airline will be relaunching regional services in March, along with six new European routes from London Gatwick.

In the summer, BA will unveil a £100 million investment in its Club World, longhaul business class service.

British Airways' Chairman, Martin Broughton, said: "Some yield improvement is still expected for this financial year. Consequently, revenue is now expected to grow by more than 8 per cent. Despite the improved revenue outlook, market conditions remain broadly unchanged as significant promotional activity is required to maintain seat factors.

"Underlying costs, excluding fuel, are now expected to be some one per cent higher than the guidance we gave at the beginning of the year, which was flat. Fuel costs continue to be a challenge for the industry, but our guidance is unchanged with total fuel costs expected to be up by £525 million this year.

BA said that total operating costs in the quarter increased by 7.3 per cent mainly due to increased fuel costs.

Borrowings, net of cash, short term loans and deposits, were £2,178 million at December 31, down £744 million since the start of the year.

(SP/KMcA)