British Airways slumped to a £401 million loss last year amid a collapse in premium-fare passenger numbers and increased fuel costs. It was its worst loss since 1982 and came after the airline made a profit of £992 million in 2007-08.

BA said that the operating environment remained so difficult that it could not predict how it would perform in the coming months. It has offered unpaid leave and part-time working to its 41,000 staff in an attempt to cut costs.

Willie Walsh, the chief executive, said that the airline had experienced its worst year and matters were not expected to improve soon. When asked whether he could see any “green shoots” of recovery in the aviation sector, he replied: “None.”

BA said that total passenger numbers in the year to March 31 were down 4.3 per cent to 33.1 million. However, it is the decline in business and first-class passengers that has affected its finances most because these are the fares that drive the airline’s profitability. BA said this month that its premium traffic had fallen by 17.7 per cent in April. The airline’s fuel bill increased by 44.5 per cent to £3 billion for the year after oil prices hit a record $147 a barrel last July.

Mr Walsh said: “The revenue environment is currently so volatile and uncertain that we don’t feel we can give any guidance on the coming year that would have any value.” BA said in April that it expected revenues to decline by 5 per cent this year.

The airline is trying to cut costs and reduced its headcount by 2,500 last year as it streamlined its management operations. It is negotiating with other staff to change working practices and impose a pay freeze. Mr Walsh said that engineering and ground staff had agreed to changes or were in the process of balloting staff on the proposals. However, the airline still has to convince 13,000 cabin crew to agree to changes in their pay and conditions.

The effect of the economic downturn resulted in BA’s cash balance falling by £483 million to £1.4 billion, while net debt nearly doubled to £2.4 billion.

BA’s share price fell almost 4 per cent, or 6.1p, to 156.7p yesterday, giving it a market capitalisation of about £1.8 billion. The group said that it would not pay a dividend this year, after returning 5p a share to investors last year – the airline’s first dividend payment in six years.

As passenger numbers continue to fall, BA said that it would reduce the number of flights it offers. It plans to cut capacity by 2 per cent this summer and 4 per cent during the quieter winter months. This could lead to up to 16 aircraft being grounded.

Howard Wheeldon, senior strategist at BGC, a brokerage firm, said: “Awful is the best word to describe full-year results from British Airways . . . bye bye dividend yet again.”

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