Another round of swingeing job cuts is on the cards at British Airways after the airline revealed it was seeking "cost efficiencies" of £450 million over the next two years.

Soaring fuel costs at Europe's third largest carrier, expected to have increased by about £510 million this year, have also raised the prospect of BA hiking its fuel surcharges yet again.

BA has already increased its fuel tax for passengers on both long and short-haul flights five times since it was first introduced in May 2004.

The airline has blamed dramatic increases in the price of oil, which last year topped $70 a barrel.

BA today gave no specific details about job losses or an increased fuel surcharge, but admitted both were a possibility in the light of higher costs and the savings it sought. It said surcharges were under "constant review".

Unions reacted testily to BA's proposal. "Everyone wants BA to continue its success. But that must include recognition that the workforce and the unions have and will continue to play a key role," said Brendan Gold, national secretary for cival aviation at the Transport and General Workers Union.

Shareholders were more enthusiastic, sending BA shares up 9.75p to 326.5p, a rise of more than 3 per cent

The airline, which is undergoing a total transformation under new chief executive Willie Walsh, outlined its savings targets at an annual investor day presentation in London.

At the event, BA put forward a two-year business plan that covers the period until March 2008, when it transfers the bulk of its operations into the new Terminal 5 development at Heathrow Airport.

It expects to achieve £225 million of savings during the course of this year, with the remainder to follow during 2007.

BA's proposals underline the determination of Mr Walsh not to shy away from cost-cutting as he moves to regenerate profits at the airline. Mr Walsh has already cut almost 600 top management jobs, following a fall in quarterly profits last November.

His predecessor Rod Eddington, slashed 13,000 jobs, or 20 per cent of the workforce, after the airline was hit hard by the terrorist attacks of September 11, 2001.

"This plan will make us fit for the future," Mr Walsh said. "By resolving our pensions deficit, reducing costs and delivering world-class customer service, we can make a 10% operating margin a sustainable reality.

"Better management of our costs and having an absolute focus on customer needs will give us a lasting platform for success."

As well as forecasting that fuel costs for the year to this month will be between £505 million and £515 million higher than the previous year, BA said its fuel costs for the 2006-07 financial year are expected to be about £400 million higher than initially thought.

However, BA argued that its overall costs outside of fuel should be broadly similar and, crucially, its onerous debt burden should fall below the £2 billion mark this month.

Also featured in the business plan were proposals to invest nearly £200 million, including a new Club World seat, films on demand and improvements to its website, ba.com.

As well as trying to develop self-service check-ins, in a move that would ape low-cost rival easyJet, BA said it was targeting big improvements in punctuality and baggage-handling ahead of the completion of Terminal 5.

Separately, Australian airline Qantas said it was overhauling all of its aircraft engineering operations and would close it B747 heaving maintenance activities in Sydney by May.

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