British Airways today reported a 92% fall in profits after the airline was hit by rising fuel costs and the impact of the economic crisis.
Pre-tax profits of £52m sterling were down from £616m the same time last year after fuel costs increased by £511m to £1.49 billion.
Despite the profits fall, BA shares closed almost 12% higher in London trading this evening because the results had been better than analysts' expectations.
BA's CEO Willie Walsh described the half-year period as 'one of the bleakest on record', but said the airline produced a good performance given the difficult trading conditions.
The airline said it hoped to make a small profit' for the 2008/09 year, but warned that fuel costs for the full year were still expected to be about £3 billion. While oil prices have fallen sharply in recent weeks, BA said this benefit was being offset by exchange rate movements and previous hedging contracts.
Revenues for the six months to September 30 were up 6.4%, despite a weakening in long-haul premium traffic since the summer. Operating profits fell to £140m from £567m a year earlier.
'The six month period will be remembered as one of the bleakest on record. The period was hit by a crisis in the banking sector, record fuel prices and several airlines going out of business,' commented Mr Walsh.
Mr Walsh said that BA, which has already reduced the number of flights it will make this winter, was planning to reduce capacity by about 1% for the summer 2009 schedule which runs from the end of March to the end of October.
BA has suspended four services from its summer 2009 schedule - Gatwick flights to Dublin and Zurich and Heathrow services to Dhaka in Bangladesh and to Calcutta in India.
Mr Walsh said the winter 2009/10 capacity would be considered over the next few months.
Mr Walsh said that he fully expects to see a number of other airline failures, which will take capacity out of the market.
Earlier this week Ryanair boss Michael O'Leary predicted that eventually just four European carriers would remain - BA, Air France, Lufthansa and Ryanair.
Earlier this year, BA and airport operator BAA endured the misery of the chaotic opening of Heathrow's new £4.3 billion Terminal 5. Mr Walsh said today that T5 was performing 'extremely well' and was a 'genuine asset' and had led to BA's punctuality performance improving 'significantly'.
BA said today that it was conducting a major review to simplify the business, reduce costs and remain competitive. 'This includes the cancellation and deferral of significant projects and the closure of our Glasgow cabin crew base,' the airline said.
BA also said it now planned to reduce its capital expenditure for this financial year from the original figure of £650m to £550m.
Mr Walsh said that the planned 35% reduction in management positions already announced was being implemented and that planned headcount reductions following the move to T5 were also proceeding. 'All other aspects of the business are under review,' he said.
BA also announced its October 2008 passenger figures today which showed the airline carried 2.84 million customers last month - 5.6% fewer than in October 2007. The biggest dip (down 6.5%) was in UK and European traffic.
BA planes flew 77% full last month compared with 80% in October 2007.
