A fall in demand from business passengers, the rise in the value of the pound and an airline price war have all hit profits.

BA's results show that the global economic crisis is leading to a reduction in passengers, posing a large problem for the airline industry.

BA is now looking to cut back on the number of seats it has on offer, and less profitable routes.

The flagship airline has also been dragged into a fare war with arch rival Virgin and a host of cut-price operators as competition in the market hots up.

The fall in earnings comes despite an extensive cost cutting programme instigated by BA.

The airline's pre-tax profits for the six months to 30 September came in at £385m ($615m), compared to £430m last year

However the results were in line with analysts expectations and the company said operating profit had risen 27.6% to £435m ($723m).

BA said its business efficiency programme, a ruthless cost-cutting drive which has proved unpopular with staff, continued to bear fruit with annual savings now expected to exceed £600m pounds in the current year.

Growth cut

The company said it would reduce growth in the number of seats it has one offer next year to 2% and will rationalise fleet orders to provide more "capital efficient" aircraft with fewer economy seats.

Chairman Lord Marshall said in his statement: "Despite current global economic uncertainties we are taking the necessary steps to ensure that we are in a flexible position to meet further challenges."

The airline's premium traffic, which includes business and first class passengers, fell 2.4% in October but was up over the last quarter overall.

BA shares remained grounded on Monday, closing unchanged at 405p.

BA's shares have gone on a rollercoaster ride over the past few months. They lost almost 6% of their value in the last two days of trading last week.

Alliance caution

The company reiterated that it was not prepared to give up take off and landing slots to facilitate its long-awaited alliance with American Airlines.

Speaking on BBC Radio 4 BA's chief executive Bob Ayling said:

Ayling: under pressure

"We cannot have a strong relationship if the terms that the regulators require of us actually make BA poorer in the long run.

"To go ahead on those terms would not be in the interests of the company, its shareholders, its employees," he added.

He said BA will continue to develop its looser 'oneworld' alliance which already includes Cathay, Qantas and Canadian Airlines, as well as American Airlines.

Lord Marshall's statement said: "We have no doubt that global alliances will be one of the driving forces of the airline industry in the years ahead, but they have to be constructed on the right terms."

Low morale

Mr Ayling said he was "pleased" with the result however he is coming under increasing pressure to improve the company's performance, with reports suggesting that morale has sunk to new depths.