British Airways said today that it would make a full-year operating loss of £150 million as recession and a weaker pound hit profits.

The airline told the London Stock Exchange that it expected a £50 million operating loss for the third quarter of its financial year, which ended on December 31.

This figure includes a £56 million charge relating to the translation of foreign currency obligations.

BA’s revenue guidance for the full year was unchanged, but non-fuel costs are expected to rise 8 per cent this year instead of the 5 per cent previously expected, as foreign exchange rates affect business.

The company said: “Further economic weakness in January and the outlook for February and March, combined with the fall in sterling, are impacting our outlook for the year.”

BA has been in merger talks with Iberia, the Spanish airline, for six months over a deal that would create one of the world's largest airlines.

However, Willie Walsh, chief executive of BA, warned last week that the deal could collapse if the Spanish flag carrier insisted on a merger of equals.

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