British Airways today announced a startling surge in profits - after axing services and thousands of jobs.

BA showed its aggressive drive to cut costs was paying off as it reported pre-tax profits of £65 million for the last three months.

The figure is up 62.5 per cent on the £40 million recorded in the same quarter last year despite the post-September 11 industry-wide collapse in trade which caused a 10 per cent slide in revenue.

The new figure comes just two months after BA reported its worst set of results since privatisation 15 years ago.

But the results come at a price.

1,800 jobs axed because of foot and mouth
5,400 jobs cut after September 11, with 13,000 planned by March next year
Nine planes been sold
Twenty-two aircraft grounded
Go, the airline's budget arm, sold
Eight routes shifted from Gatwick to Heathrow.

Chief executive Rod Eddington said: "We are only six months into a two-year structural change programme. Despite very tough market conditions, we are delivering.

"We have always said our recovery will be cost-driven and not dependent on an upturn in market conditions. That remains true."

But BA warned the travel market was expected to remain weak for the rest of the year, meaning revenues were expected to be lower than in 2001.

Chairman Lord Marshall said: "The travel market continues to be subject to considerable global economic and political uncertainty, and is expected to remain soft for the remainder of the year.

As a result, full year total group revenues are expected to be lower than last year and improvement in operating results will come principally through cost reductions."

The group has been hit by the slump in demand for air travel following September 11 and has also faced intense competition from budget airlines such as Ryanair and easyJet.

The cost reductions meant it managed to improve profits despite a 10.7 per cent slide in revenues during the quarter to £2.05 billion.

And it comes just two months after BA reported its worst set of results since privatisation 15 years ago, with full-year losses of £200 million.