British Airways forecasts 2006/7 revenue up 4-5 pct

LONDON (AFX) - British Airways PLC has forecast its revenue will increase by 4-5 pct in the year to end-March 2007, driven by increased capacity and more passengers in its planes.

The flag carrier said it is also on track to deliver its holy grail of a 10 pct operating margin in the year to March 2008, assuming fuel prices and the external environment are stable.

For the current year to the end of this month BA expects revenue growth of more than 8 pct.

At its annual Investor Day, the airline also tweaked its guidance on fuel costs. It now expects them to rise by 505-515 mln stg in the current year, compared to previous guidance of 525 mln stg. The bill is expected to rise by 400 mln stg in the following year.

Total costs, excluding fuel are forecast to be flat in the 2006/7 year, with increases offset by cost efficiencies.

BA expects its net debt by the end of this month to fall below 2 bln stg.

At the meeting the airline's new chief executive, Willie Walsh, also detailed plans to generate cost efficiencies of 450 mln stg by March 2008, when BA will move into its new operational home in Terminal 5 at Heathrow airport.

The targeted savings are worth 225 mln stg in 2006-07 and a further 225 mln stg in the following year.

He said investment of nearly 200 mln stg would include a new Club World seat and on-demand films in all cabins.

New procedures aimed at improvements in punctuality, and baggage performance in preparation for Terminal 5, plus greater use of self-service check-in are also planned.

The two year business plan also aims to raise the proportion of BA customers who book their seats directly from the airline to half from the current third.

"This plan will make us fit for the future," said Walsh. "By resolving our pensions deficit, reducing cost and delivering world-class customer service, we can make a 10 pct operating margin a sustainable reality."
 At 9.23 am shares in BA were up 5 pence at 421-1/4.

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