BA flies to £230m profits

SHARES in British Airways slid to a new 2004 low today after fears over the escalating price of fuel dampened news of better-than-expected profits.

The national flag carrier reported a 70% rise in pre-tax profits to £230m for the year to 31 March even after it digested an extra £80m of fuel costs in the 12 months.

It expects fuel costs to rise by a further £150m this year to break through £1bn. This year's revenues are forecast to grow by between only 2% and 3%, reflecting continued tough trading.

Finance director John Rishton said the carrier expects to claw back only about half those extra costs through last week's controversial decision to slap a £5-a-time fuel surcharge on passenger tickets. He said about 45% of BA's future fuel consumption is hedged at an average price of around $28.50.

But the fuel warning and the failure to signal a resumption in the payment of shareholder dividends - axed two-and-a-half years ago after the 9/11 atrocities - sent BA's stock down 7 3/4p to 239 1/2p, its lowest since the start of the year and a fall of nearly 30% over the past two months.

BA's debts were cut by almost £1bn to £4.1bn in the year. Net debt is now about two-thirds its levels at the height of the post-9/11 crisis and at its lowest in seven years. Rishton has a self-imposed target of £3bn.

Cost savings after the 13,000 job cuts ordered by chief executive Rod Eddington have risen to £869m, almost £220m more than Eddington promised two years ago.