British Airways will raise fares, slash flights and consider cutting its order of new aeroplanes as the flag carrier prepares to follow a year of record profits with its toughest 12 months since 2001.

BA staff secured a £35m windfall today after the airline hit its 10% profit margin target for 2008, but analysts warned that the coming years could be bonus-free as a high oil price and a weak global economy pose a fundamental threat to the industry.


Willie Walsh, BA chief executive, reiterated his determination to guide BA through the storm as he atoned for the Terminal 5 fiasco by waiving the £700,000 bonus that he should have received for overseeing record pre-tax profits of £883m.

The airline is expected to ground services in the winter as it reduces costs in the face of an escalating global oil price, which could push its fuel bill to more than £3bn this financial year. Douglas McNeill, analyst at Blue Oar Securities, said the airline would cover the cost increase by raising fares, which would squeeze out discretionary travellers and make the carrier reliant on must-travel customers such as business passengers.