Page last updated at 17:33 GMT, Monday, 26 January 2009

Weak pound hurts British Airways

BA plane
BA has been hit by sterling's weakness

British Airways has warned it expects to make an operating loss of about 150m in the airline's 2008/2009 financial year.

The airline blamed economic weakness and the fall in the value of sterling for the deteriorating outlook.

It said that non-fuel costs were now expected to rise by 8%, compared with an earlier forecast of 5%.

The firm also said it expected to make an operating loss of 50m in the final three months of 2008.

Shares hit

The warning sent BA shares down 8.5% to 133.8 pence.

BA said it expected revenue to be up at least 4% from the previous financial year, adding that passenger traffic was in line with the market.

Fuel costs are expected to be largely unchanged at around 3bn as the lower price of aviation fuel is offset by the weak pound, it added.

The decline in sterling makes aircraft leasing, which is paid in dollars, more expensive. Air traffic control and airport charges have also become more costly for the firm.

"Further economic weakness in January and the outlook for February and March, combined with the fall in sterling, are impacting our outlook for the year ended 31 March 2009," the company said in a statement to the stock exchange.

BA said in November it hoped to make a small profit for the 2008/09 financial year.

The company will announce its third-quarter results on 6 February.



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