British Airways signaled business is stabilizing, eclipsing news of a worse than expected first half loss and a prediction that revenue would slump by 1 billion pounds ($1.7 billion) this year.
Shares in the company jumped as much as 8 percent, making it the biggest gainer on the FTSE 100 index, as the company also said revenue from business travelers was back at pre-credit crunch levels by one industry measure.
The market was fearing something worse but BA's tone was more optimistic than it has been -- it can see light at the end of the tunnel now, said Evolution analyst Nick Cunningham.
As we move into winter, it's like BA can see the spring.
BA, whose alliance with American Airlines and Spain's Iberia is being scrutinized by European and U.S. competition watchdogs, on Friday reported a pretax loss for the six months to end-September of 292 million pounds ($482.4 million), while revenues fell 13.7 percent to 4.1 billion.
The airline, which has reduced operating costs by 8.7 percent, cutting free meals on some flights, said it would slash more costs, with another 1,200 staff losing their jobs next year taking the total number of job losses to 4,900.
Our revenues are likely to be about 1 billion pounds lower this year so we're determined to reduce costs further to ensure we return to acceptable levels of profitability, Chief Executive Willie Walsh told reporters on a conference call, adding that BA was riding along the bottom of the downturn.
Shares in BA, which have risen 27 percent in the last quarter, were 5.9 percent higher at 197.2 pence by 1439 GMT, valuing the group at around 2.5 billion pounds.
Shares in peers Lufthansa and Air France-KLM , which have also cut their bloated cost bases in response to the recession, both rose.
BA reported better traffic data, with all-important premium, or business class, traffic down 1.4 percent in October year-on-year, a vast improvement on September's 7.9 decline.
It also said premium yields -- the revenue it makes on each business class passenger for every mile traveled -- had returned to pre-credit crunch levels over the last three months.
The airline's loss -- impacted by lower interest rates, a higher pension burden and restructuring costs -- compares with a first-half pretax profit of 52 million last year and expectations for a loss of between 235 million and 255 million in a Reuters poll of six analysts.
LESS PESSIMISTIC TONE
BA said passenger revenue fell 13.6 percent, on capacity 3 percent lower, while yields were down 12.2 percent.
However, it said volumes and yields had started to stabilize, with analysts predicting the worst could be over.
The tone is a little less pessimistic than before. That is consistent with the view that BA has reached the bottom of the downward cycle, said Astaire analyst Douglas McNeill.
The global recession has battered the airline industry as consumers cut back on trips abroad and lucrative business class travelers fly less. BA has also been hit by potential labor strikes and growing competition from low-cost carriers such as Ryanair which reported an 80 percent rise in first-half net profit earlier this week.
The International Air Transport Association recently said it expected airlines to lose $11 billion this year.
Walsh said he was confident in the strength of BA's case to win U.S. Department of Transportation approval for a sales tie-up with American Airlines and Iberia.
A decision on BA's proposed merger with Iberia would likely come in the very near future, he added.
Walsh also said industry conditions were still challenging -- bad news for planemakers Boeing and Airbus who are headed for their worst annual order tally in 15 years.
Bank of America Merill Lynch estimates BA made a 144 million pound loss for the second quarter -- normally one of its best quarters -- and analysts expect it will suffer a larger full-year loss than last year's record 401 million deficit.
BA is expected to report a pretax loss of 568.76 million pounds for the year to the end of March, according to a Thomson Reuters I/B/E/S poll of 19 analysts.
The carrier is still in talks with unions over staffing problems and reiterated plans to impose new contracts on crew.
BA's pension scheme deficit widened by 1.5 billion pounds to 2.6 billion in the first-half as equity gains were offset by changes in the calculation of liabilities.
(Additional reporting by Cecilia Valente; editing by Jon Loades-Carter and Paul Hoskins)