British Airways 1Q Profit Rises 72 Percent

British Airways PLC said Friday its first-quarter net profit rose 72 percent as the carrier saw passenger traffic driven by low fares on short-haul routes and strong demand for lucrative business class flights.

But the company warned of tougher conditions in the second half, with fuel and pension costs expected to rise.

Net profit for the three months ending June 30 rose to 150 million pounds ($282 million), up from 87 million pounds a year earlier. Revenue rose 12.5 percent to 2.32 billion pounds ($4.36 billion) from 2.06 billion pounds.

"These are good results driven by strong revenue as a result of record seat factors and better cabin mix," said Chief Executive Willie Walsh.

Walsh said low fares on short-haul flights had been "a big success," despite a brutal competition in the market.

But he said market conditions are likely to get more difficult in the second half due to increasing price competition and that yields, or average fares, are likely to decline over the full year.

The company said it had seen a 44 percent rise in fuel costs to 512 million pounds ($963 million) and noted that fuel costs for the full year are expected to be as much as 600 million pounds ($1.13 billion) more than last year when the bill came to 1.63 billion pounds ($3.06 billion).

High fuel prices have led airlines to raise the surcharges that passengers pay on long-haul flights.

In June, BA confirmed that two senior executives had been placed on leave as British and U.S. authorities investigated alleged price-fixing in passenger fares and fuel surcharges by BA and other airlines.

Britain's Office of Fair Trading said it was conducting "both a criminal and civil investigation into alleged price coordination by airlines in relation to fuel surcharges." BA commercial director Martin George and head of communications Iain Burns were given leaves of absence.

The airline said it expects an increase in total revenue for the fiscal year to March 2007 of between 6 percent and 7 percent, compared with the previous guidance of 5 percent to 6 percent.

"Costs excluding fuel which were previously forecast flat, are now expected to be slightly higher this year as pension costs are driving employee costs up," Chairman Martin Broughton said in a statement.

Shares in British Airways fell 3.2 percent to 376.75 pence ($7.08) on the London Stock Exchange.

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