Soaring oil forces BA to raise fares

British Airways will announce today that it will more than double its special surcharge to passengers as a result of the soaring cost of fuel.

The company is expected to raise the charge it has imposed on each ticket from £2.50 to some £6. The news will be delivered with the company's first quarter results, which are forecast to see the airline return to profit.

The position of Rod Eddington, BA's chief executive, will also be a major point of interest. A newspaper report over the weekend suggested that the Australian planned to step down at the end of next year - much earlier than indicated by Mr Eddington, who has suggested that he wants to lead BA for many years to come. As recently as last month's annual meeting, Mr Eddington, 54, emphasised how happy he was in the job. He has said, though, that BA will be his last job in aviation.

A BA spokesperson declined to comment on "speculation". The spokesperson pointed out that Mr Eddington is committed to being chairman of the strategy group at the industry body the International Air Transport Association until the end of next year. That position requires him to hold a job at an airline.

BA sources said that Mr Eddington had not suggested that he has any plans to move on and it would be "surprising" if he left as early as the end of 2005. Separately, BA is currently looking to recruit four new non-executive directors.

Mr Eddington has led BA since 2000 and steered the carrier through some very challenging times, including the grounding of Concorde, the Twin Towers terrorist attacks, the wars in Afghanistan and Iraq, and the outbreak of Sars in Asia.

The first-quarter results, announced today, are predicted to show pre-tax profits of £100m, a significant turnaround from the £45m loss the period saw last year. Analysts said the profits would have been at least £25m higher had it not been for a 10 per cent increase in fuel costs.

The carrier will warn that the current price of crude oil, of about $40 a barrel, will add £200m to its fuel bill if sustained for the rest of the year - £50m more than BA indicated three months ago. On this basis, total fuel costs this year would exceed £1.1bn.

The airline will announce that it will put a charge of some £6 on all long-haul flights to compensate for this rise in fuel costs. The move is likely to be followed by Virgin Atlantic, which has also put a £2.50 fuel charge on its tickets.

After staff wages, jet fuel is BA's biggest cost and the company hedges less of its fuel needs than many rivals. The jump in the price of fuel comes at an unfortunate time for BA, which has been showing signs of recovery.

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