First, business class bookings hike BA profits

First, business class bookings hike BA profits

	Published : Fri, 03 Feb 2006 17:25 By : Amy Watts Print this Story

LONDON: British Airways Plc. posted a 29 per cent increase in third-quarter profits Friday beating market forecasts. The airline said increased first and business class bookings helped it to offset rising fuel and employee costs.

The airline said its operating profit was 175 million pounds, compared with 136 million pounds in the corresponding previous year quarter. This beat analysts' expectations of around 164 million pounds.

The airline's turnover went up 8.8 per cent to 2.13 billion pounds. While improved demand for first class and business class seats was the main reason, the airline said its stable ticket prices and new routes to India and Shanghai helped improve the revenue.

BA said it had a 3.3 per cent rise in passenger traffic in January 2006.

The airline maintained that its profit margin targets will be largely governed by fuel costs. It expects its annual fuel bill to rise by 525 million pounds this fiscal. Fuel costs went up by more than 28 per cent during the quarter in spite of having hedging contracts. However, Willie Walsh, new chief executive, said he has no plan to hike fuel surcharges on tickets.

The airline's average passenger fare fell 1.5 per cent in the quarter, but it will be slightly higher for the fiscal year ending March. It will have to continue with the scheme of offering discounted seats in order to carry capacity.

BA said it expects to have an 8 per cent revenue growth for the year against its previous forecast of between 6 and 7 per cent.

Walsh said the fuel price continues to represent significant headwind in relation to achieving a better operating margin. "We are not expecting that," he said, referring to the targeted 10 per cent operating margin.

Walsh, who became CEO in October last, said the airline does not intend to take delivery of its new long-haul aircraft until it moves into the new terminal at Heathrow in 2008.

The airline said the August strike by ground staff at Heathrow had pushed costs up. The airlines is also facing a substantial deficit of 1.4 billion pounds in its pension funds and Walsh said he planned to meet with unions in March to try and find a solution.

BA shares initially rose 1.0 per cent on the results were down 0.9 per cent at 321-1/4 pence.