British Airways reported that its half-yearly profits had nose-dived and announced it was already axing services from its summer 2009 schedule.
Pre-tax profits for the period April-September 2008 crashed more than 90% to £52 million, with BA chief executive Willie Walsh describing the half-year as "one of the bleakest on record".
The airline said it was reducing capacity by 1% for summer 2009 and suspending its Heathrow services to Calcutta and to Dhaka in Bangladesh and also axing Gatwick flights to Dublin and Zurich.
Mr Walsh said that a decision on the shape of the winter 2009/10 schedule would be made in the next few months. But he added that he expected more airlines to cease operations and that this could lead to more capacity.
Despite the sharp dip in profits, BA shares rose around 15% as investors welcomed the company's forecast that it expected to make a small profit in this financial year.
The City was also heartened by the news that BA's yields rose more than 10% as a result of higher fares and the impact of a stronger US dollar. Panmure Gordon stockbrokers described the figures as a "reasonable performance in difficult market conditions".
BA's pre-tax profits for the same period last year had been as high as £616 million, but this year BA's had to contend with fuel cost increases of £511 million to £1.49 billion.
Revenues for the six months to September 30 were up 6.4%, despite a weakening in long-haul premium traffic since the summer. Operating profits fell to £140 million from £567 million a year earlier.
Mr Walsh said "The six-month period will be remembered as one of the bleakest on record. The period was hit by a crisis in the banking sector, record fuel prices and several airlines going out of business."
Mr Walsh went on: "I fully expect to see a number of other airline failures and that will take capacity out of the market."
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