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Last Updated: Friday, 4 August 2006, 08:40 GMT 09:40 UK
BA profits soar despite fuel cost
BA aircraft taking off
BA is being investigated by regulators over alleged price fixing
Rising passenger numbers have helped British Airways shrug off the rising cost of aviation fuel and post a 57% increase in first quarter profits.

Pre-tax profit for the three months to the end of June hit 195m, compared with 124m in the same period of 2005.

Profits rose despite a 44% rise in fuel costs and a 7% hike in staff costs as a result of BA's pension scheme deficit.

BA said new low fares had boosted short-haul traffic and it had still been able to raise its profit margin.

'Brutal' competition

This rose to 9.1%, compared with the 8.5% margin earned in the first quarter of 2005.

"On short-haul, our new low fares have been a big success," said chief executive Willie Walsh.

"While competition in this market is brutal, I am delighted to see we are winning customers with record seat factors."

But Mr Walsh warned that market conditions were set to get tougher in the second half of the year as airlines became more competitive on prices.

Meanwhile, fuel costs were expected to be 550-600m higher than they were in 2005.

Price-fixing inquiry

However, Mr Walsh said that there were no immediate plans to raise fuel surcharges for customers.

BA tail fins at Heathrow

BA is being investigated by UK and US regulators for alleged price fixing involving fuel surcharges on long-haul flights to and from the UK.

The airline's commercial director and head of communications have been given leave of absence during the inquiry.

Mr Walsh said that BA's 2.1bn pension deficit would be discussed over the coming months.

BA has been hit by a series of summer strikes in recent years, but Mr Walsh sounded upbeat about the prospect of avoiding a repeat this year, saying that the airline had made "steady progress on changes to working practices".

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