British Airways yesterday presented a gloomy outlook for the rest of this year but chose not to downgrade its profit forecast. This surprised many analysts who have cut their own expectations dramatically. BA reduced its profit margin forecast earlier this year from 10 per cent to 7 per cent, but gave no further update despite the downbeat views of the chairman and the chief executive.

This pessimism is shared by the City: Exane BNP Paribas has estimated that the airline's profit margin will fall to just 3 per cent. Collins Stewart gave warning that if oil stays above $120 a barrel, BA's pre-tax profits could fall from £883 million to just £40 million.

However, with no formal profit downgrade, investors seized upon the 45 per cent increase in profits last year and the first dividend payment in seven years, pushing the stock up 9p to 233p. Willie Walsh, chief executive, said that he would leave profit estimates to the City and gave updates only on cost projection and the revenue growth forecast.

Analysts believe that BA chose not to revise its profit guidance because it has no idea how the fuel-price crisis could turn this year.

Aer Lingus, the Irish carrier, said on Thursday that it expected a first-half loss this year and would give no guidance for the rest of the 12-month period because the situation was too uncertain.

BA also cannot be sure how passengers will react to higher air fares, whether oil will rise higher or whether the economic downturn in the UK and United States will affect premium travel.

This uncertainty means that profits could fall to zero, or even surpass BNP's estimate of £273 million. The only certainty seems to be that the City does not expect BA to reach the £637 million implied by its own estimate, making another profit warning inevitable sooner or later.

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