The Wall Street Journal-20080204-British Air-s Net Soars 22- Amid Strong Demand

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British Air's Net Soars 22% Amid Strong Demand

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A WSJ News Roundup

LONDON -- British Airways PLC posted a 22% rise in nine-month net profit amid strong demand for its business-class fares, shrugging off concerns about the effect of the global economic downturn on its business, but warned of rising fuel costs.

Banking on further growth in the premium market, Chief Executive Willie Walsh said that BA will start double daily business-class-only flights from London City airport to New York next year. The new flights will operate on Airbus A318 aircraft with 32 flat-bed seats and will offer 15-minute check-in times to ensure a fast transit.

However, shares in the carrier dropped 4.2% to 318 pence ($6.32) as analysts expressed concern about its premium strategy following the collapse of business-class-only airline MAXjet Airways in December and BA's rising fuel bill.

The carrier generates much of its profit from its long-haul business and first-class ticket sales, particularly on trans-Atlantic routes. Premium traffic rose by between 5% and 10% in each of the past three months compared with a year earlier. Less lucrative economy-class traffic rose 0.9%.

Rising fuel costs are another concern. BA said that fuel costs soared GBP 72 million ($143.2 million) in the quarter ended Dec. 31, after falling GBP 36 million in the first six months of the year.

"Our ability to mitigate fuel costs next year will be challenging," Mr. Walsh said.

BA said net profit rose to GBP 623 million in the nine months ended Dec. 31 from GBP 509 million a year earlier. Revenue rose slightly to GBP 6.62 billion from GBP 6.56 billion.

The airline reiterated its forecast that revenue in the fiscal year ending March 31 will rise 3% to 3.5% and said it is on track to reach its desired 10% annual operating-profit margin.