Weak US dollar helps British Airways

British Airways announced record first-half profit today due to its cost cutting programme. However, shares in the airline fell nearly 5% in early trading but later recovered.

Profit before tax was £593 million in the six months to the end of September 30, up 26% compared with the same period last year.

Analysts at Deutsche Bank said this was a good set of figures from a strong management team.

Chief Executive, Willie Walsh, said their cost performance was excellent, helped by the weak US dollar. The market focused not on the way the weak dollar would help cut costs, but on the way it would reduce revenues after BA cut its view of full-year revenue growth to 3 to 3.5% from earlier guidance of 4%.

Mr Walsh continued by saying premium bookings remain strong and the North Atlantic non-premium market is still soft but other non-premium markets are more encouraging.

BA believes that the limitations on hand luggage will be eliminated soon which will relieve the hassle factor. Furthermore, BA provided an update on the development of its new home in Terminal 5 at Heathrow Airport which is due to open next March.

In spite of the increasing price of oil, BA has lowered its prediction for fuel costs by £20 million, but fuel costs are expected to be up by £100 million on last year.

BA said fuel costs are still a major challenge and their fuel bill for the year is expected to reach £2 billion which is the highest ever.

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