British Airways Lifts Revenue Target, Shares Jump

British Airways stuck to its forecast for a small operating profit this year and lifted its revenue target, despite first-half profit plunging more than 90 percent due to high fuel costs and the global financial crisis.

The British carrier said higher prices and a helpful exchange rate would offset falling passenger numbers, meaning revenues are expected to grow 4 percent this financial year, up from a previous estimate of 3 percent.

BA shares were up 9.6 percent at 143.4 pence by 0923 GMT, following a fall of almost 12 percent the previous day. The shares are down nearly 53 percent this year.

Neil Glynn, airlines analyst at NCB, upgraded BA to "buy," from "sell," saying the majority of earnings weakness over the next 12 months is factored into the stock price. BA has been raising fares to offset the decline in passengers, most keenly felt in its highly profitable business travel market -- down more than 9 percent last month.

BA said pretax profit fell to 52 million pounds ($82.64 million) in the six months to end September from 616 million a year earlier. Total passenger numbers continued to fall in October, down 4.4 percent.

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"This is a good performance given the incredibly difficult trading conditions. The six month period will be remembered as the bleakest on record," Chief Executive Willie Walsh said, citing high fuel costs and the banking crisis.

Walsh also said merger talks with Spanish partner Iberia remained on track. He said BA had cut capacity for next summer by 1 percent to address falling demand due to the economic downturn, and would review next winter in the new year.

"We fully expect to see a number of airline failures over the winter, so we may have increased capacity next winter," he told reporters.

The airline is the third of Europe's big five to report half year figures. Low-cost rival Ryanair, which in contrast to BA is cutting prices, said it would break even for the current financial year. Germany's Lufthansa said it would post a relatively healthy operating profit of 1.1 billion euros ($1.41 billion), while Air France-KLM and easyJet report over the next two weeks.

Pension Talks

Walsh said merger talks with Iberia had so far focused on BA's pension deficit, which was reported in September to be 1.5 billion pounds -- around the same as the market capitalisation of the entire company.

He added that talks had yet to reach the crucial topic of the share split between the two companies. The fall in BA's share price since talks were announced has provoked market speculation that Iberia could demand a greater split than the third estimated during the summer.

Walsh said anti-trust immunity for its alliance with American Airlines was expected from the U.S. early next year -- despite a campaign by rival Virgin Atlantic.

British Airways said its fuel bill for the year would still be the previously stated 3 billion pounds despite lower oil prices, and that its hedging strategy remained broadly in place.

Finance director Keith Williams said the airline had hedged 40 percent of its fuel in 2009/2010, meaning that if the oil price stayed at $75 a barrel and the dollar at 1.65 to the pound the group's bill would be 2.8 billion pounds.

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