British Airways in first profit for two years

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Media caption,

Chief Executive Willie Walsh paid tribute to staff for the ''excellent'' progress

British Airways (BA) has reported a half-year profit of £158m ($252m), its first in two years, as the company prepares to merge with Iberia of Spain.

The stronger-than-expected results come despite the impact of cabin crew strikes and the Icelandic ash cloud.

Meanwhile, Iberia has reported a nine-month profit of 53m euros (£46m; $74m).

Separately, it has emerged that BA boss Willie Walsh and other executives will receive substantial pay rises after the two airlines merge.

Bounce back

Analysts had been expecting a profit figure for BA of about £75m - half of what the airline actually made.

Revenues were up 8.4% to £4.4bn, thanks to a particularly strong 39% rise in cargo revenues, according to the airlines official release.

Costs were cut by 1.5%. The company said that cost control was something that it continued to focus on.

Performance was much stronger during the latter half of the six-month reporting period.

Pre-tax profits in the three months to September - which was free of strikes and ash - were £322m.

This more than offset a loss in the previous quarter, which saw 15 days of strikes as well as the eruption of the Eyjafjallajoekull volcano in Iceland in April.

The company also suffered under European air traffic control strikes during the period, though Mr Walsh boasted that despite this, 74% of BA's Heathrow flights and 84% of its Gatwick flights still departed on time.

The half-year results mark a complete turnaround from the £292m loss that BA made during the same period in 2009, at the depth of the recession.

Pay packet

British Airways and Iberia will merge on 21 January.

Mr Walsh will become chief executive of the combined company - International Consolidated Airlines Group - and will see his basic pay rise 12% to £825,000 a year.

He will also be eligible for performance-related bonuses under the merger deal, that will be capped at twice his basic pay, or £1.65m.

Mr Walsh's colleague, BA chief financial officer Keith Williams, will see his basic pay rise 43% to £630,000 after his promotion to replace Mr Walsh as BA chief executive within the enlarged company.

Mr Williams' bonus will be capped at 1.5 times his basic salary.

Air Passenger Duty

Mr Walsh used the opportunity of the financial results release to criticise a tax rise on passengers due to kick in next week.

"Excessive taxation puts aviation's social and economic benefits at risk," said the company in its press release.

Air Passenger Duty (APD) will increase by up to 55% on some long-haul flights, the company claimed.

"Aviation supports more than 500,000 jobs in the UK and provides the transport links that are vital to the success of UK businesses in a globalised economy."

The UK government says the tax increase will better reflect the cost of carbon emissions by the airline industry.

"We already meet our carbon costs twice over even before these increases," claimed BA.

On Thursday, BA's bitter rival Virgin Atlantic also criticised the tax change, claiming it would make family holidays unaffordable for many.

'Bad tax'

Easyjet also joined the bandwagon, saying that the rise, to £12 on flights within Europe, means the tax will have increased by 140% since 2007.

"APD is a bad environmental tax as there is no relation between the level of the tax and the level of emissions," said the budget airline on Friday.

"Transfer passengers joining flights departing from the UK pay no tax and those travelling on private jets remain exempt, while ordinary passengers bear the full burden of the tax."

Both parties in the coalition promised during the election to switch the duty from a passenger tax into a per-flight tax, in order to reflect the actual environmental impact of the airline industry.

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