BA has announced a 90% drop in profits for the first six months of 2008.

British Airways (BA) has announced its half-year interim management report for the 1 April – 30 September 2008, a period “remembered as one of the bleakest on record” with profits down more than 90%, from £616 million to £52m.

The huge drop in profits is attributed to the economic climate, and in particular the record fuel prices. Market fuel prices increased by 73% over the same period last year, and BA has anticipated its annual fuel bill will be up around 50% to £3 billion.

The impact of the economic crisis on currency also added to BA’s costs, contributing to more than half of its extra £200m spend on other expenditures.

Willie Walsh, BA’s Chief Executive, commented on a “good performance” in such a challenging environment: “Costs are up £711m and remain a key challenge. Employee costs, including a £40m severance provision, were up 8.6%. We have made good progress with our plans to offset the difficult conditions.

“We have reviewed the summer 2009 schedule and plan to reduce capacity by some 1% compared with summer 2008. We have revised capital expenditure plans and remain focused on cost control and our strong cash position.”

He also predicted that the airline was on track to achieve a small profit at the end of the financial year and attributed the company’s relative success to a number of factors, including the increased punctuality of BA flights – summer flights experienced an increase of more than 20% in punctuality rates compared with 2007.

BA expects its business to improve in 2009, partly due to its recent proposed alliance with American Airlines and Iberia, which is expected to receive a response from the US Department for Transport next year. Capacity will also be reduced in 2009 – by 1% through the suspension of flights from Heathrow to Dhaka and Calcutta, and from Gatwick to Dublin and Zurich.

Overall, the airline expects business revenue to grow by 4%, an increase on its earlier prediction of 3%.