BA's cuts deliver a record summer

But a warning that revenues for the full year will not be as high as hoped set BA shares back 4%, down 19p at 411p.

Investors hoping for a return of their first dividends since the 9/11 terrorist atrocities in 2001 were also disappointed after BA said they would have to wait until next spring.

Shrugging off a recent history of strikes, pension rows, a price-fixing investigation and chaos at its home airport of Heathrow, BA chief executive Willie Walsh said: "These are record results and our business plans for the future are gaining real momentum."

Despite flat revenues of £3.8 billion for the six months to the end of September, hit by the weak dollar which accounts for 25% of its income, BA was able to pull off record profits through a £150 million reduction in employee costs after endingBA staff 's gold-plated pension schemes.

While that boosted the bottom line, BA's side of the agreement to pump funds into the company's £10 billion retirement schemes sent net debt soaring by 40% to £1.4 billion.

The half-year profits, flattered by a poor comparative in the summer of 2006 in the aftermath of the Heathrow bomb threats, were also boosted by a 3.5% reduction in fuel costs. Despite the rising price of oil, BA has forwardbought and hedged much of its demand.

However, the City was spooked by the forecast outlook from the airline. "We have revised our revenue guidance to around 3% to 3.5% because of the continued weakness of the US dollar," said Walsh, who had previously made forecasts of 4% revenue growth.

He further warned: "Fuel costs remain a major challenge and our fuel bill for the year is expected to top £2 billion for the first time." That is around 5% higher than last year.

Walsh has also pinned his reputation on making a 10% operating profit margin-this year for the first time in a generation at BA.

While margins have been at 12.5% during the first half, trading over the winter months is traditionally much harder and Walsh would only say there is "every possibility" the 10% target would be hit.

Onthe decision not to restart dividend payments yet, finance director Keith Williams said: "We have always said we would get there when we get to the 10% full-year target."

BA's plans to launch first-time services from continental European airports to New York as part of next year's so-called Open Skies liberalisation of the transatlantic aviation market hinge on a key meeting next week.

BA's plans could be scuppered if a taking off and landing slots conference at New York's premier hub JFK fails to grant the carrier any slots from an airport which is suffering from congestion.

Williams declined to comment on speculation that BA is closer to cementing its relationship with the top US carrier American Airlines via a joint venture ormulti-billion-dollar merger.