Short-sellers strengthen their grip on troubled BA

Willie Walsh says that it is wrong to increase Air Passenger Duty (GETTY IMAGES)

More than 16 per cent of shares in British Airways are now on loan to short-sellers, suggesting investors believe that stock in the troubled airline which faces a make-or-break few weeks is still over-valued.

Data Explorers research found that the number of hedge funds and investors who have been selling short over the past three months has been rising steadily to just shy of the all-time high of 17.4 per cent. Short-selling – when investors borrow securities from prime brokers and sell them on in the hope that they can buy them back later at a lower price – has stepped up again over the past few weeks as BA's shares have fallen from 240p to 180p. Just over 50 per cent of the available lending inventory of shares is now out on loan.

Shares bounced back up on Friday to 198p, the biggest one day rise in two months, after BA said that business passenger traffic numbers were finally improving despite reporting the worst results in its history.

BA's chief executive, Willie Walsh, also threatened by strike action, announced a £292m crash into the red and revealed another £48m of restructuring costs in the six months to September. Mr Walsh, who warned that BA still faces tough trading, said the company is now tackling the mismatch of flights and passengers to aircraft, and flight costs, which has bedevilled the airline. Aircraft are now flying fuller, with load factors of up to 80 per cent.

Mr Walsh said revenues are likely to be down by about £1bn in the full year and that costs were still to be cut to meet tougher demand. But BA's unions are still threatening a Christmas strike because of attempts to change working practices and cut another 3,000 jobs.

Talks between BA and Spanish airline Iberia, which could mean the British airline moving its headquarters to Madrid, are said to be continuing.