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LONDON (Reuters) - British Airways, Europe's third-largest airline, said on Friday third-quarter operating profit rose 29 percent, ahead of expectations, after strong passenger numbers helped offset rising fuel bills.
The airline (BAY.L: Quote, Profile, Research) slightly raised its revenue forecast but warned costs would be higher than expected and reported lower average passenger fares in the quarter as it discounted seats to keep planes full.
"The results are slightly above consensus but on the other hand there are some not too good things in it," BNP Paribas analyst Nick van den Brul said, pointing to falling yields and costs.
Operating profit for the three months to end-December was 175 million pounds, compared to 136 million pounds a year ago.
Analysts had expected the airline to post an operating profit of 164 million pounds, according to the average from a poll of eight analysts by Reuters.
BA said pretax earnings were 164 million pounds compared to 151 million pounds a year ago.
A recovery in first and business class, or premium, traffic and new international routes to India and Shanghai helped BA keep planes full, while ticket prices stabilised in the period.
Passenger yields -- or average passenger fares -- fell 1.5 percent in the quarter but were expected to be slightly higher for the year, BA said. It forecast 8 percent revenue growth for the current year compared to a previous forecasts of 6-7 percent.
"Despite the improved revenue outlook, market conditions remain broadly unchanged as significant promotional activity is required to maintain seat factors," Chairman Martin Broughton said in a statement.
However, costs excluding fuel would be one percent higher than earlier forecasts, Broughton said. Labour costs are rising due to higher pension contributions and the one-off cost of a cut in senior management jobs at the carrier.
BA also reported a 3.3 rise in January passenger traffic.