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Last Updated: Monday, 9 August, 2004, 15:28 GMT 16:28 UK
BA increases fuel cost surcharge
British Airways tail fin
High oil prices are hurting airlines
British Airways passengers are to face higher charges as the airline passes on rising fuel costs to passengers.

The carrier's fuel surcharge for long-haul passengers is to more than double from 2.50 to 6 per one-way flight.

The news came as BA reported pre-tax profits of 115m in the three months to June, up from a 45m loss in the same period last year.

Virgin Atlantic soon followed BA's lead, raising its surcharge from 2.50 to 6 for all flights sold in the UK.

Fuel fluctuations

BA said it would leave its surcharge for short-haul passengers unchanged at 2.50 per flight.

The increased 6 per trip charge for long-haul passengers means customers will pay a 12 surcharge for a return flight.

These are reasonable results but currently fuel and employee costs remain our biggest challenges
BA chief executive Rod Eddington

"Fuel prices have risen by 45% in the last 12 months and our fuel costs are expected to be 225m higher than last year," said BA chief financial officer John Rishton.

"We anticipate that the combined fuel surcharges will contribute 70m towards these costs."

The price increase for long-haul flights will come into force on Wednesday, BA added.

Following BA's announcement, Virgin Atlantic said it would also be raising its fuel surcharge.

Virgin said it would be upping the surcharge from 2.50 to 6 for all flights sold in the UK - resulting in an extra 12 charge for return flights.

BA said it had also taken greater action to limit the impact of fuel price movements.

The airline has now hedged 72% of its fuel buying up to March 2005, whereas in May it had hedged just 45%.

Strong performance

BA outlined the changes as it outlined its forecast-beating results - analysts had expected a pre-tax profit of around 100m.

The strong performance reflected a 5.1% rise in revenues to 1.9bn the group said, adding that it had managed to cut total costs by 0.9%.

"These are reasonable results but currently fuel and employee costs remain our biggest challenges," said chief executive Rod Eddington.

In addition to the forecast rise in fuel costs, Mr Eddington also said higher pension contributions of 133m a year are driving a significant increase in employee costs.

Looking ahead, the group's chairman Martin Broughton said market conditions remained unchanged.

"Long-haul premium volumes are recovering steadily, while short-haul premium travel remains at lower levels. The non-premium markets are very price sensitive," Mr Broughton said.

Strike fears

He added that the airline expected revenues to increase over the next year, but added that cost-cutting strategies remained the key to "achieving long-term, sustainable profitability".

However, BA could be facing the prospect of staff walk-outs this summer.

More than 8,300 baggage handlers and check-in staff are being balloted over possible strike action in a row over pay.

Last week, BA warned its employees that any action could seriously damage the company.

Wildcat strikes at Heathrow last year by check-in staff, over the introduction of an electronic swipecard clocking-on system, cost the airline 40m as 500 flights were cancelled affecting 100,000 passengers.

The BBC's Simon Montague
"People have no choice about a higher fuel surcharge"

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