Sky-high profits at BA

JOB CUTS and a recovery in the business travel market boosted profits at British Airways by a third last year - despite mounting fuel costs.

BA reported an 80% jump in pre-tax profits to £415m from £230m previously, a result that reflects tough cost-cutting across the group.

More than £300m has been shaved off the bottom line, partly through hefty job cuts, a big increase in the use of online bookings and self-service check-ins ? 600,000 passengers now use these dedicated kiosks at airports every month.

Outgoing chief executive Rod Eddington, who leaves BA in September, said the figures showed the airline making good progress, with net costs down 1.6% and net debt down by £1.2bn to £2.9bn, its lowest level since 1993. Eddington admitted, however, that there were still some clouds on the horizon in the shape of higher fuel costs.

These are now expected to be about £400m more than last year, which represents a further substantial increase on the £300m rise it forecast previously. This will continue to affect yields, the amount that the airline makes for every person it carries. Yields dropped 4.4% and were down for the third year in a row, despite the introduction last May of a fuel charge levy on all tickets sold.

Even so, the carrier's statistics show that its aircraft have achieved a 74.8% average load factor, a big increase that reflects BA's decision to reduce capacity.

Today's figures represent a huge success for Eddington, who has pushed through a large package of financial cuts and some 13,000 jobs to achieve results above City forecasts.

{3} BA has now outstripped the performance of rival Lufthansa and marks the culmination of five years of cost-cutting by Eddington. However the continued high oil price means that there will be no let up in pressure on Willie Walsh, the former Aer Lingus boss who joined BA last week and takes over from Eddington at the end of September.

There was no happy ending for investors, with the disclosure that there will be no full-year dividend. BA has not paid dividends since July 2001. But there was better news for staff. Rising profits have triggered bonuses of one week's pay for each of BA's 40,000 employees.

Meanwhile, BA said it plans to retire its fleet of BAE 146 aircraft during 2005-2006. The airline, which has one of the newest fleets of aircraft of any major passenger airline, told This is Money that it has no plans to order the new Airbus A380. The giant double-deck aircraft, which has already been ordered by long-haul carrier Singapore Airlines, needs more customers.

BA said it would 'wait and see' how the aircraft performed once in service before making any decisions. The airline currently operates 57 Boeing 747-400 jumbo jet aircraft on its long-haul routes.