BA fears turbulence ahead as profits soar

BRITISH Airways today announced a big jump in pre-tax profits, although it warned that it is facing a "challenging" year ahead as costs rise.

The troubled move to Heathrow's Terminal 5 and rising oil prices are likely to make its 2008/09 profits at the lower end of expectations, the company said.

But there was little sign of the troubles in its results for the year to the end of March, which included a record fourth quarter.

Pre-tax profits surged ahead by 45 per cent to £883 million as revenues increased by three per cent to £8.7 billion.

The strength of the company's performance triggered a £35m bonus pool for its 42,000 staff, while BA will also pay its first dividend since 2001.

But BA chief executive Willie Walsh revealed he will not be taking up his bonus. He said: "I am not getting a bonus. I felt it would be inappropriate in the context of the very disappointing opening of Terminal 5 in March."

In its annual results, the company said it expected revenue growth of around four per cent in the current year, at the lower end of guidance previously given.

It said that the first quarter of the year will be "particularly difficult" following the rise in crude oil prices from $58 a barrel in the first quarter last year to around $120 a barrel now. The airline forecasts that its total fuel costs will rise by £1bn in the current year.

It also admitted that the delayed transition to Terminal 5 will affect both costs and revenues in the quarter and full year.

Mr Walsh said: "Despite the difficulties of the opening of Terminal 5 in the first few days, it is now working well and some two million passengers have gone through it and many have enjoyed the experience."

But the problems so far, together with the economic downturn, are expected to make current trading difficult. "The full year will also be challenging, against an uncertain economic outlook," BA said in a statement.

"As a result, we have reduced capital expenditure and are reviewing our capacity, costs and network in the context of the economic pressures and high fuel prices."