BA hoisting fares 10% despite steep plunge in profits

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Chief executive Willie Walsh defied the gloom in the industry, pledging BA will make a profit this year as the airline continues with its fuel surcharges, ramping up ticket prices to offset large fuel bills and slumping passenger numbers.

Shares in the airline, which have crashed by two-thirds in the past year, soared today, 21.2p at 151.7p, as the City was caught on the hop by an unexpectedly bullish statement from Walsh.

Despite the fall in earnings in the six months to the end of September - operating profit was down from £567 million to £140 million and pre-tax profit crashed from £616 million to just £52 million - the results thrashed aviation analysts' bearish forecasts.

"This is a good performance given the incredibly difficult trading conditions," said Walsh. "The six-month period will be remembered as one of the bleakest on record."

At the heart of the bounce in BA shares was news that the airline is managing to force through fares rises. Its yields, the money it makes per passenger, have risen 10.5% in the six months, more than offsetting falling volumes. Latest figures for October reveal a 9.2% fall in business and first class and a 3% dive in economy class.

More importantly, that enabled Walsh to raise revenue forecasts for the full year to next March to 4% from 3% and predict a "small operating profit" against previous target of break even for the 12 months

Finance director Keith Williams said BA had been able to increase its fares because of the success of Heathrow's Terminal 5 since its botched opening in March which caused so much controversy.

"We have had an excellent operational performance at Terminal 5 where we have broadly now completed the transfer of our services from the three terminals where we were previously operating," he said. "It is that performance that has enabled us to increase our yields."

Further cost cutting will also help BA avoid the red. It plans to reduce its staffing numbers by more than 1000 at Heathrow from the current 7300 to around 6200 by next April.