BA in a tailspin over costs

BRITISH Airways fell 24 1/2p to 284 1/2p after warning of falling prices and up to £400m in extra costs next year. It was also hit by travel fears following the bombs in Madrid.

The airline said higher pay, pension costs and fuel and landing charges were likely to cost an additional £300m to £400m in the year to March 2005.

This is likely to offset previously announced savings. BA has already set out plans to cut £750m over three years.

It sees capacity rising 2% to 4%, but admits revenue per seat will come under pressure.

Chief executive Rod Eddington was coy about whether the short-haul business will meet forecasts by at last breaking even this month. But he warned that short-haul premium traffic has halved over three years and, thanks to the rise of budget airlines, he does not believe it will recover.

On the positive side, he aims to cut debt from £5bn to £3bn 'in the next couple of years'.

BA has risen from 86p a year ago on hopes for the economic upturn.