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Last Updated: Friday, 13 May, 2005, 08:42 GMT 09:42 UK
BA sees jump in full-year profits
Nose of BA jumbo jet
High fuel prices are an industry wide problem that are here to stay
British Airways (BA) has seen an 80% jump in full-year profits as cost cuts offset record jet fuel prices.

In the fiscal year ending 31 March, the airline posted a profit of 415m ($773m) on sales of 7.8bn. BA shares were up 2% at 259.25p by mid-afternoon.

Despite the strong annual gains, BA's fourth quarter was hit hard by the high crude oil prices and the airline said the problem was likely to continue.

Profit slumped to 5m from 45m a year earlier as fuel costs rose 18%.

BA said earnings in the quarter also were dented by an increase in engineering costs and the sale of the company's stake in Australian airline Qantas.

'Good results'

Strong earnings growth in the first nine months of the year helped compensate for any problems in the fourth quarter, Europe's second-biggest airline said.

"These are good results, driven by continued cost control and strong demand for our products," said BA's outgoing chief executive Rod Eddington, who will step down in September after five years with the airline.

BA blamed high fuel costs for a 40% drop in quarterly profits
Market conditions remain broadly unchanged
Martin Broughton, BA chairman

Mr Eddington will be replaced by former Aer Lingus boss Willie Walsh.

BA said it made savings of 457m between 2003 and 2005, 7m more than planned.

A large part of the savings came from job cuts and the airline has reduced its headcount by 13,000.

Net costs dropped 1.6% over the past fiscal year, while the company's operating margin widened to 6.9% - its best since 1997.

With the extra cash, BA has been paying down its borrowings and has cut its debt levels to 2.9bn, the lowest since 1993.

Fuel charge

However, BA said that many of the problems it has faced will continue in the current fiscal year, with fuel costs increasing by about 400m.

That is likely to impact on yield levels, or the amount of revenue the company makes for every person carried, despite BA planes being fuller than ever before.

During the last fiscal year, BA's yield dropped 4.4%, down for the third year running.

"Market conditions remain broadly unchanged," BA chairman Martin Broughton said in a statement.

In an effort to limit the impact of crude oil surges, BA introduced a fuel surcharge in May 2004.

It subsequently increased the payment in August, October and most recently in March.

The surcharge on long-haul flights is now 16 per journey, up from the original 10. For short-haul passengers, the fuel charge rose to 6 from 4 per trip.

"For the year to March 2006, total revenue is expected to improve by 4-5%, up from 3-4% due to the impact of the latest fuel surcharges," Mr Broughton added.

See inside one of BA's planes

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