British Airways said it would miss its full-year revenue targets as passenger numbers fell sharply in March, with the fall in demand steepest in the UK flag carrier's high-earning premium travel segment.

Passenger volumes dropped by 7.3% and the demand downturn would impact year to March revenue by up to £25 million ($36.7 million), cutting expected growth to less than 3.5%, BA said on today.

The carrier, whose previous revenue forecast was for 3.5% growth, said the volume decline included a 13% drop in premium or business passengers, while the load factor - a measure of how full its planes are - dropped 6.4 points to 72.7%.

"Market conditions remain challenging, with both volume and yield under pressure in all markets ... The revenue outlook for the full year (to end March) will be impacted by some £20-£25 million due to the weakness in volume and yield, particularly in U.S. traffic," it said in a statement.

BA shares shed some of their early strong gains to be up 5.5% at 164 pence this afternoon, valuing the company at £1.8 billion.

BA, which is in merger talks with Spain's Iberia, confirmed a February forecast that it was likely to make a year to March operating loss of £150 million, not including severance costs of £75 million.

Analysts were expecting full year revenue of just over £9 billion, according to Reuters estimates, up from £8.7 billion the previous year.

Irish budget carrier Ryanair posted a 5% passenger rise in March, slightly lower than previous months due to the timing of Easter.