Some 35,000 British Airways staff in the UK are to receive bonuses this summer after the airline posted its highest profits since 1998.

The airline said the payout fund of £45 million - worth £612 for staff at the bottom of its pay scale - reflected a sharp improvement in margins as BA's annual profits hit £415 million, against £230 million last year.

BA said improved demand and its continuing drive to cut costs and boost efficiency had lifted the figures, which were ahead of City hopes.

Chief executive Rod Eddington, who hands over to former Aer Lingus boss Willie Walsh in September, said: "These are good results delivered in a difficult trading environment."

BA shares rose two per cent despite warning it faces a £400 million rise in its fuel bill this year. It has already sought to offset some of the increase by imposing higher fuel surcharges on passengers.

The airline achieved an operating margin of 6.9 per cent in the year, triggering the first bonus payment for non-management staff in seven years.

BA has a long-term target of ten per cent, which it hopes to achieve by further changes to working practices and efficiency improvements.

Since September 11, BA has cut 13,000 jobs, enabling it to exceed its 2003/05 savings target of £450 million by £7 million.

Brendan Gold, national secretary of the Transport and General Workers' Union, said it was now time for BA to place a high premium on job security.

He said: "In the tough and tight world of aviation, BA has done well and credit should be given to the workforce who have delivered their part in that turnaround.

"On the basis of these figures, we'll be looking to meet with the new chief executive and placing job security high on the agenda."

The figures showed BA's net debt fell by £1.2 billion to £2.9 billion - the lowest level since 1993.

Mr Eddington, who is due to return to his native Australia, said his focus during the remaining months in charge would be to ensure the company got off to a strong start on its new set of targets.

BA said profits for the fourth quarter of its financial year fell to £5 million, £40 million lower than a year earlier, because of the impact of the sale of BA's shareholding in Qantas.

Operating profits were £40 million - £8 million better than last year and reflecting a 1.9 per cent rise in turnover to £1.89 billion.

May 16, 2005