British Airways Heads For Record Quarterly Loss

The airline said on Friday it had made an operating profit of 89 million pounds ($130.2 million) for the first nine months of the year.

British Airways is set to post a record loss for its fourth quarter as it continues to battle falling demand and weak sterling, but its shares rose as analysts said the carrier should survive the economic downturn.

The airline said on Friday it had made an operating profit of 89 million pounds ($130.2 million) for the first nine months of the year, sharply down from 744 million a year ago.

It said in a profit warning last month that it would post a full year operating loss of 150 million pounds, meaning the three months to end March would see it plunge nearly 240 million pounds into the red.

"The bleak operating environment will likely make Q4 a record loss," UBS analyst Tim Marshall said in a note, while two other analysts told Reuters they estimated the loss would break new ground.

However BA shares, which had fallen nearly a third so far this year, climbed 2.9 percent to 130.6 pence by 1012 GMT as analysts saw signs of optimism in an improved yield and the first monthly rise in economy passengers this financial year.

"BA is really feeling it, but the equity markets look forward. Is BA going to get to the other side in one piece? The answer is looking like yes," Evolution analyst Nick Cunningham told Reuters.

BA Chief Executive Willie Walsh said he was not expecting the economic backdrop to improve in the short term.

"The trading environment is very tough -- external circumstances will determine what happens, (but) we are planning on not seeing any major improvement for the next 24 months," Walsh told reporters.

He added that the group's cost base was under review, and that certain jobs might be cut despite the departure of nearly 500 managers on a voluntary redundancy basis late last year.

"We are continuing to look at the numbers of people employed -- it is regular activity," Walsh said.

The news comes against a backdrop of contrasting fortunes for European airlines.

Rival Air France-KLM issued a profit warning last month, but the last of the big three full-service European carriers, Lufthansa, surprised the market earlier in the week by raising its 2008 profit forecast.

Low-cost carriers easyJet and Ryanair have also raised recent forecasts, saying travellers are trading downwards during the recession.

IBERIA TALKS PROGRESS

BA is still in merger talks with Spanish partner Iberia more than six months after discussions were announced, and Walsh said he shared recent optimism from Iberia Chairman Fernando Conte that a deal could be struck.

"I share his optimism. We have made very good progress, and we expect that progress to continue," he said, without giving a timescale for when a deal could be announced.

BA also said on Friday its passenger numbers fell 1.3 percent year-on-year, while its load factor -- an indication of how many paying seats were filled as a percentage of capacity -- was up 1 percent at 73.2 percent.

However, premium or first and business class traffic fell 13.7 percent year on year.

BA's yield -- the average revenue per passenger carried and kilometre flown -- rose 9.6 percent to 6.95 pence.