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British Airways posts a loss but stays confident

BRITISH Airways is set to post a record loss for its fourth quarter as it continues to battle falling demand and a weak sterling, but its shares rose as analysts said the carrier should survive the economic downturn.

The airline said yesterday that it had made an operating profit of 89 million pounds (US$130.6 million) for the first nine months of the year, sharply down from 744 million a year ago.

It said in a profit warning last month that it would post a full-year operating loss of 150 million pounds, meaning the three months ending in March would see it plunge nearly 240 million pounds into the red.

"The bleak operating environment will likely make fourth quarter a record loss," UBS analyst Tim Marshall said in a note, while two other analysts told Reuters that they estimated the loss would break new ground.

However BA shares, which had fallen nearly a third so far this year, climbed 4.47 percent to 133.30 pence by midday trading as analysts saw signs of optimism in an improved yield and the first monthly rise in economy passengers this financial year.

"BA is really feeling it, but the equity markets look forward. Is BA going to get to the other side in one piece? The answer is looking like yes," Evolution analyst Nick Cunningham told Reuters.

BA Chief Executive Willie Walsh said he was not expecting the economic backdrop to improve in the short term.

"The trading environment is very tough -- external circumstances will determine what happens, (but) we are planning on not seeing any major improvement for the next 24 months," Walsh told reporters.

He added that the group's cost base was under review, and that certain jobs might be cut despite the departure of nearly 500 managers on a voluntary redundancy basis late last year.

The news comes against a backdrop of contrasting fortunes for European airlines.

Rival Air France-KLM issued a profit warning last month, but the last of the big three full-service European carriers, Lufthansa, surprised the market earlier in the week by raising its 2008 profit forecast.

Low-cost carriers easyJet and Ryanair have also raised recent forecasts, saying travelers are trading downward during the recession.


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