BA profits soar 70%

British Airways today posted a 70-per-cent hike in annual profits but warned that sky-high oil prices would cost it an extra £150 million this year.

British Airways today posted a 70-per-cent hike in annual profits but warned that sky-high oil prices would cost it an extra £150 million this year.

The airline - which last week raised prices by £5 for a return trip to cover fuel costs - said it expected revenues to grow by up to 3 per cent in the current financial year. But continuing fuel price rises will have a major effect.

Pre-tax profits of £230 million for the 12 months to March 31 were higher than expected in the City, while BA reported strong progress in its drive on costs.

Annual savings of £869 million had been delivered by its Future Size and Shape strategy against a target of £650 million, chiefly through the loss of 13,082 jobs.

Despite the improved profits performance, BA revealed a number of key marketsremained under pressure and it would not be paying a final dividend toshareholders.

The airline has been affected over the past year by terrorist concerns, with the cancellation of a number of transatlantic flights having an impact on forward bookings.

BA said today that long-haul volumes were recovering steadily, but short-haul demand in the premium sector remained weak.

Volumes were expected to rise in the current financial year as confidence returned to the aviation industry.

Chairman Lord Marshall said: "The continuing focus on controllable costs remains key to long-term profitability."

BA said the overhaul of its balance sheet was crucial to remaining competitiveamid tough market conditions.

In addition to lowering staff costs by £481 million, the group unveiled savings of £130 million in procurement and £257 million in sales and distribution.

The size of its fleet was cut from 330 aircraft to 291 during the year, while planes were now being used more often on short-haul routes.

Chief executive Rod Eddington said: "We ended the year a stronger business despite the challenges faced by our industry."

BA has previously signalled the need for a further £300 million of cuts over the next two years - a move unions fear requires 4,000 extra job losses.

In a conference call to reporters, Mr Eddington said employee costs would remain under review as the company sought to make further savings.

"We are working with the unions and workforce to find acceptable ways to reduce staff costs and that's ongoing," he said.

A 1.7% fall in annual turnover to £7.56 billion reflected the impact of the Iraq war and Sars virus in the first half of the year.

Mr Eddington said further progress had been made in slashing losses at its short-haul business, which mainly operates flights between the UK and Europe.But this market was set to become even tougher over the next 12 months as budget airlines increase capacity on routes to mainland cities.

Losses of £60 million at its short-haul business included £30 million of one-off exceptional charges, Mr Eddington said.