British Airways has sunk to new a low by posting record pre-tax losses of £148m for the three months ending 30 June, its first quarterly loss since privatisation in 1987. Even last year when the recession had already started to take hold, the airline made a profit of £37million over the same time frame.

However its £94 million operating loss for the three months to the end of June was slightly ahead of forecasts, sending shares higher in early trading.

The spring first quarter is traditionally the airline’s strong quarter, capturing the start of the summer, but the airline is suffering with lower passenger numbers, particularly in business class.

Revenues sunk 12.2% in its first quarter to £1.98bn, although the decline would have been 16.8% without a positive impact from exchange rates.

The airline said that the pace of decline in passenger numbers had stabilised during the quarter, although numbers were considerably down on last year.

Chief executive Willie Walsh said: “Trading conditions continue to be very challenging with underlying revenue down 16.8% and no visible signs of improvement.
“While traffic volumes are down considerably compared to last year, they have stabilised during the quarter and show some signs of improvement for the peak summer months.”

Costs fell 6.6%, but chief executive Willie Walsh said “there is much more to be done”.

The airline has announced plans to reduce its capacity by 3.5% this summer to cope with the drop in demand. By winter 2010, BA expects to have grounded 22 aircraft from its fleet.

On Wednesday it said it was scrapping all meals except breakfast on its short-haul flights in an effort to save £22m. The company is also considering axing chocolates and canapes for business class passengers.

The airline has cut manpower by 1,450 since March 31 through reduced overtime, increased part-time working and targeted voluntary redundancy.

Walsh has also asked thousands of BA staff to take pay cuts. Pilots have accepted a pay cut, but negotiations with cabin crew and ground staff continue. The failure to reach an agreement over plans to cut up to 3,700 jobs and freeze pay has left BA and unions locked in a 14-day cooling off period.

Earlier this month, BA said it planned to raise more than £600m to cope with the recession.