British Airways (BA) today announced its worst-ever interim loss since its privatisation in 1987 amid falling numbers of lucrative business travellers and freight cargo, as well as volatile fuel prices.

Today's results, for the six months to September 30, show BA made a £292 million pre-tax loss compared with a £52 million profit last year. They mark the end of a torrid week for the airline as the threat of strikes over the crucial Christmas period heightened and the company faced a High Court action over changes to staff contracts.

The loss for the six months was greater than the £252 million forecast by analysts. Revenue also fell, down 13.7 per cent at £4.1 billion, compared with £4.75 billion in 2008.

However, this morning, BA shares rose 6.28 per cent, to 198p a share.

Gert Zonneveld, an anaylst at Panmure Gordon, said that despite the half-year losses to the end of September, traffic for October had been better, with improvements in premium long-haul traffic and yields. “Premium revenues are a massive driver for BA. Long-haul is also an extremely important part of the business,” he said.

He added that cost-cutting drives had been even more successful than planned, with £275 million already saved. In February, the airline said it wanted to reduce costs by £220 million.

Willie Walsh, chief executive of British Airways, said that revenue was likely to be down by £1 billion for the year as a whole and that it was imperative that the airline continued to reduce costs.

He said: “Our costs are some £400 million lower and manpower has been cut by 1,900 through reduced overtime, increased part-time working and targeted voluntary redundancy. Total liquidity of some £4 billion puts us in a strong position."

He added: “We’re are cutting winter capacity by 6 per cent and making further manpower reductions of 3,000 by March 2010 and permanent changes to the way we run our business.”

BA has been in talks with Iberia, the Spanish airline, for more than a year and today hinted that negotiations with the group were close to an end and would not be affected by the losses.

The company said that booking levels were "ahead of expectations" on its new all-business flight from London City airport to JFK, New York.

Earlier this year, it was revealed that Mr Walsh had a 6 per cent rise on his basic salary, putting him on £735,000 plus benefits. However, Mr Walsh waived his salary for August this year, amounting to an 8.5 per cent pay cut He also waived his bonus last year after the shambolic opening of Heathrow Terminal 5.

Yesterday, the High Court threw out an application submitted by Unite, the union that represents 14,000 BA crew, for an injunction to stop the airline reducing the size of the crew on long-haul flights. However, BA’s crew won the broader argument about whether BA may have breached crew contracts and the airline will now face an action in the High Court on February 1.

The legal manoeuvrings are the latest stage in a nine-month wrangle between BA and its crew. BA wants to save £140 million from its cabin crew budget as the loss-making airline seeks to streamline its operations.

Earlier this week, Ryanair, the budget airline, said that it would soon topple BA as the UK’s biggest airline. Although it carried 1.4 million passengers in the British market during September, compared with BA’s 1.6 million, Ryanair is forecasting that it will continue to grow as BA contracts.

Ryanir posted half-year pre-tax profits of £376.2 million.

Michael O’Leary, chief executive of Ryanair, said that this would allow his company to overtake BA as Britain’s biggest carrier. “It is hard to know when it will happen because it is hard to keep up with how fast BA’s passenger numbers are declining,” Mr O’Leary said. “We will overtake them at some point — and I am not talking about months [when] they have a strike.”

Yesterday, a quarter of the staff at bmibaby, the budget arm of bmi, were told they were to lose their jobs, only two days after Lufthansa, its parent, put a new boss in charge of the loss-making airline.

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