BA warns of £150m loss

British Airways said today it would make an annual operating loss of around £150 million after costs rose by more than expected.

The airline blamed the impact of currency movements for an 8 per cent year-on-year rise in non-fuel costs, compared to previous guidance of 5 per cent.

It now expects results for the third quarter to 31 December to show an operating loss of £50 million, leading to a possible deficit of £150 million for the year to March 31.

BA shares were 5 per cent lower following the update.

The slump in the value of the pound has hit the company in areas such as aircraft leasing, which is paid in dollars.

BA added: "Further economic weakness in January and the outlook for February and March combined with the fall in sterling, are impacting our outlook for the year ended 31 March 2009."

BA said revenues guidance for the period remained unchanged, with an increase of at least 4 per cent year on year. Fuel cost estimates are also likely to be unchanged at around £3 billion as the lower price of fuel is offset by a reduced fuel hedging benefit for the year and currency impacts.

BA said in November it hoped to make a small profit for the 2008/09 financial year.

Costs have also been impacted by overseas air traffic control charges, which are paid in euros, while airport charges are paid in euros and dollars.