British Airways (BA) today reported a record loss of £401 million as high oil prices and falling passenger numbers took their toll on the flag carrier. The dramatic pre-tax loss for the year to March 31 follows a record £922 million profit last year.

Willie Walsh, chief executive of BA, said: “The prolonged nature of the global downturn makes this the harshest trading environment we have ever faced.” He warned that there was no prospect of an immediate improvement.

BA also cut financial guidance for the next year because of the economic volatility, becoming the latest in a wave of companies that included Unilever and L'Oreal to do so.

BA shares fell 6 per cent or 9p to 154p in early trading this morning. The company also scrapped its dividend, which last year stood at 5p a share.

The airline said that it was cutting its capacity by 4 per cent next winter in response to the downturn and added that it was offering staff unpaid leave and part-time employment to cut its wage bill.

The company also revealed that net debt has risen by £1.1 billion to £2.4 billion, as the weak pound translated to higher debt denominated in foreign currencies and the plummeting price of oil resulted in higher costs on its fuel hedging policy.

Martin Broughton, the chairman of BA, said: "In the last twelve months we have gone from a record profit to a record loss due to the current tough economic environment. That only serves to underline the extremely difficult trading conditions that we are facing, despite our best ever operational performance, and any recovery is likely to take longer than initially envisaged."

He added that falling fuel prices will bring costs down by £400 million this year. The price of oil is hovering around $60 (£38) a barrel, down from its peak last summer of $147.

Fuel and oil costs rose 45 per cent to £3 billion, while turnover rose 2.7 per cent to £9 billion. Passenger numbers fell to 33.1 million, while load factor, a measure of how full its aeroplanes are, fell 2.1 percentage points to 77 per cent.

Revenue per passenger for every kilometre travelled rose by 6.7 per cent.

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