Shares in British Airways have showed their biggest one-day gain in over two decades despite the carrier reporting a 92% fall in first-half profits.

The airline said it was fighting the economic slowdown by raising prices and cutting capacity, in contrast with low- cost carriers that are cutting fares to fill seats.Its slump in profits were in line with expectations. However markets reacted buoyantly to the airline raising its forecast for full-year revenue growth to 4 percent from 3 percent, as well as BA promising to scale back capital spending and eliminate hundreds of management jobs. Shares surged over 16% by mid-morning trading.

After a weak summer peak season in 2008, pre-tax profits for the six months from April 1 to September 30 slumped to £52m from £616m in the same period last year.

BA chief executive Willie Walsh said: “This is a good performance given the incredibly difficult trading conditions. The six month period will be remembered as one of the bleakest on record. The period was hit by a crisis in the banking sector, record fuel prices and several airlines going out of business.”

BA will reduce its capacity by 1% next summer by cutting the number of flights on some of its busiest routes such as Heathrow to Edinburgh and Paris. It also announced today that it is stopping four services next year to Dhaka in Bangladesh, Kolkata in India, plus Gatwick to Dublin and Zurich.

The airline said it expected fuel costs to top £3bn this year despite the fall in the oil price from $147 per barrel over the summer to less than $70. It said the stronger dollar had eaten up some of the gains from cheaper fuel prices but it had also been caught out by its fuel hedging programme.

Traffic, calculated as the number of passengers multiplied by distance flown, fell 4.4 percent in October. The load factor, or the proportion of seats filled, declined 3 percentage points to 77 percent.
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