British Airways has reported net profit of £27 million ($53.5 million) for the fiscal first quarter, ended 30 June. This result is down 90.1% from £274 million earned in the corresponding period last year.
It said the drop was largely due to a 49.3% year-on-year rise in fuel costs, which were up at £706 million after hedging.
"We are in the worst trading environment the industry has ever faced. The combination of unprecedented oil prices, economic slowdown and weaker consumer confidence has led to substantially lower first-quarter profits," CEO Willie Walsh commented.
According to the carrier, even though revenue was up 2.8% to £2.26 billion, total operating costs also went up15.2%, to £2.22 billion. Operating profit, it said, was down 86.8% to £35 million, as compared to £263 million a year ago.
Passenger revenue was up 2.9%, to £1.97 billion on a 0.7% lift in Available Seat Kilometre (ASKs). It said weak consumer confidence, particularly in the UK and US, resulted in reduced traffic volumes.
RPKs were down 3.7% and seat factor fell 3.4 points to 73.4%.
However, yields were up 6.9% on the back of increasing fuel surcharges, a stronger euro and good long-haul premium traffic. Cargo revenue was also up 21.9% to £178 million.
The carrier has now lowered its full-year guidance and says it expects revenue to grow by around 3% versus the previously forecast 4%.
"We are well prepared," Walsh said. "Since year end we have adapted our plans to reflect the fast-moving and challenging conditions. We have reduced capacity in the winter schedule without compromising our network and at the same time we have the flexibility in the business to capitalise when conditions improve. We have revised our capital expenditure plans and are focusing on cost control."
Only last week BA confirmed it was in merger talks with Iberia. If approved the tie-up would create a group with annual revenue of €16.6 billion ($25.89 billion) and a fleet of 443 aircraft. Under consideration are proposals that both carriers may be allowed to retain their brands, and that their shares be held by a holding company which would be listed in London and Madrid.
BA CEO Walsh said it would be "several months" before talks are finalized.