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Friday, 2 August, 2002, 12:17 GMT 13:17 UK
BA shares hit by revenue fears
BA aeroplanes on the tarmac
BA is facing fierce competition from no-frills airlines
British Airways has warned that revenues are set to decline this year, despite reporting a rise in profit for the April-to-June period.

The airline put the rise in profits down to its cost cutting programme, which has seen it make big cuts in both staff numbers and the number of flights it operates.

But BA said it could not forecast when revenues would start to increase again.

The news unsettled investors, and shares in BA had slid 4.7% to 143p by Friday lunchtime.

Profits up, revenue down

BA reported a pre-tax profit of 65m for the April-June quarter, up from 40m for the same period last year, which was better than most analysts forecasts.

BA Chief Executive, Rod Eddington
Rod Eddington: "Nobody knows" when revenues will pick-up
Operating profit rose to 158m, against 50m last year.

But revenue for the quarter fell by 10.7% from last year's figure to 2.1bn.

Rod Eddington, British Airways' chief executive, described the results as "encouraging".

"We have always said our recovery will be cost driven and not dependent on an upturn in market conditions," he added.

Tough outlook

BA's chairman Lord Marshall warned that the airline still faced a challenging environment.

"The travel market continues to be subject to considerable global economic and political uncertainty, and is expected to remain soft for the remainder of the year," he said in statement.

"As a result, full year total group revenues are expected to be lower than last year and improvement in operating results will come principally through cost reductions."

BA said it had no idea when the air passenger market would begin to improve.

"Nobody really knows," said Mr Eddington.

"We don't know when markets are going to rebound because we don't know what's going to happen across key economies, or in the Middle East," he said.

Struggle

British Airways reported an annual loss of 200m in May this year, its worst loss since the company was privatised in 1987.

The airline was badly hit by the slump in air travel following 11 September, and has also faced fierce competition from no-frill airlines.

Earlier this year it launched its "Future Size and Shape" restructuring programme which plans to cut costs by 450m by the end of the financial year by operating fewer flights and reducing staff numbers.

In addition to cost-cutting measures, BA is trimming fares on many of its European routes in an attempt to win back business from the budget carriers.

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 ON THIS STORY
The BBC's Mike Johnson
"BA is trying to win customers back by slashing prices on some European routes"
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