Profits dive 88% at British Airways

British Airways said the airline industry is facing the worst trading environment ever as first quarter profit plunged 88 per cent to £237 million.

Pre-tax profits were hit by fuel costs, which are up 49 per cent, the airline said, and the fuel bill is likely to hit £3 billion this year.

Every $1 increase in the price of oil costs the airline £8 million, British Airways added.

The company also blamed weakened consumer confidence on reduced passenger numbers and its 'seat factor' – representing the number of seats filled each flight - is down 3.4 points to 73.4 per cent.

However, price increases and fuel surcharges meant yields were up 6.9 per cent.

The delayed move to Terminal 5 also increased operating costs for the airline, by 8.5 per cent.

British Airways' chief executive Willie Walsh, said: "We are in the worst trading environment the industry has ever faced. The combination of unprecedented oil prices, economic slowdown and weaker consumer confidence has led to substantially lower first quarter profits."

In response, British Airways said it is cutting down on costs by reducing its winter schedule and ordering new, more energy efficient aircraft.

Earlier in the week, British Airways also announced plans to merge with Spanish carrier Iberia to increase efficiencies.

Analysts expect this to be the first deal in a wave of consolidation across the industry as conditions become tougher.

British Airways reduced its revenue forecast from a four per cent increase to around three per cent, as it is expecting fuel to rise by around £1 billion from last year, a 50 per cent increase.

The company is focused on achieving a "small profit" in the current financial year, British Airways said.