British Airways has had its worst year yet, recording a loss of �200m before tax and one-off charges for the year to March 2002.

We have had to take a series of tough decisions this year to protect BA for the long term

Rod Eddington BA

The company is suffering after a wretched year, which began with a tourism slump thanks to the foot and mouth epidemic and then worsened as travellers gave up on transatlantic flights following 11 September.

With heavy debts to take care of, there will be no dividend for shareholders this year.

But while the numbers are dismal considering BA's record, they are much better than many investors had feared.

Some forecasts had suggested BA would lose more than �400m, following a profit of �186m in the previous 12 months.

Costs have been cut - by almost 13% in the fourth quarter - routes axed and 13,500 jobs are to go.

Way to go

Still, with sales down 10% at �8.3bn the company has a long way to go before it makes it back into the black.

Chief executive Rod Eddington cited a string of "tough decisions" which had had to be made to protect BA for the long term.

But he refused to be pinned down when asked about a date.

"A profit prediction is not somewhere I want to go," he said.

"It is very difficult to say with any assurance what's going to happen to revenues this year."

Delivery

But he insisted that the quarterly improvement - down to the "dedication of staff in delivering cost efficiencies and high standards of customer service" - would carry the firm through the difficult times.

Observers were broadly positive - while staying cautious about whether BA could continue to pull itself around.

"Delivery is the keyword for BA," said Anthony Bor, analyst at Merrill Lynch.

"These results show more encouraging signs."

And Amanda Forsyth, a fund manager at Standard Life Investments, noted that the massive cost-cutting seemed not to have affected the company's operational performance.

BA shares were marked 3.75p higher at 239.25p in lunchtime trade on Monday.

Annus horribilis

What happens next may depend on whether the low-cost, no-frills airlines which have cleaned up in the wake of 11 September can continue to grab traffic away from the big, traditional carriers.

The threat from the likes of Easyjet - which has now bought BA's former subsidiary Go - has led the company to rework its fare structure.

It has also cut back its fleet and switched some operations from Gatwick to Heathrow.

But even before the attacks on New York City and Washington DC, BA was having a hard time of it.

The cost-cutting programme is aimed at slicing �670m off the airline's spending by 2004.

But there are signs that it is pulling round, with passenger revenue kilometres - a key measure of how much money is coming in - down 4.3% in the fourth quarter despite an 11% drop in overall capacity.

Passenger revenue kilometres measures how much money is made out of passengers, depending on how far they travel.