By Gavin Stamp BBC News Online business reporter

A strike would disrupt BA's 4,000 flights over the holiday weekend

Having weathered the most severe crisis in the history of the civil aviation industry after September 11, the airline was glimpsing a future with less turbulence than at any time in the past three years.

A combination of rocketing oil prices, intensified competition from its no frills rivals, and the return of industrial unrest has made it a long and uncomfortable summer for the company.

City analysts are in doubt as to how damaging a strike, particularly one over the busy August Bank Holiday weekend, could be to BA's finances.

One analyst has estimated the potential cost at between �10m (14m euros) and �15m a day to the airline.

Contingency plans

Last year's wildcat strike by BA staff at Heathrow airport forced it to cancel 500 flights and is reported to have cost the company �40m in lost revenues.

It is very tough industry and BA is a long way off making a sensible level of profit Mike Powell, Dresdner Kleinwort Wasserstein

Any stoppage at the end of August would be less severe since BA has been negotiating with unions during the past six months and will have had time to draw up contingency plans.

The airline should be in a better position to operate more flights and limit disruption, which last year resulted in 100,000 passengers having their journeys either delayed or cancelled.

Nevertheless, a stoppage would still be hugely damaging.

Although the airline made a �115m pre-tax profit in the last quarter, compared with a �45m loss the year before, analysts argue that the company's finances are still far from healthy.

"BA's financial position is a lot stronger than it was immediately after 9/11 and its survival is not in doubt," says Mike Powell, an aviation analyst with Dresdner Kleinwort Wasserstein. But "it is very tough industry and BA is a long way off making a sensible level of profit."

"A strike is avoidable but chances are it will go to the wire. There is a principle at stake."

Hard choices

BA is already having to contend with record crude oil costs which have forced it to increase fuel-related surcharges on long-haul flights.

BA has cut its workforce by 13,000 since August 2001

It also is facing a drop in yields, or the amount airlines make per passenger, which fell 4.5% from the first quarter's already low level.

Revenues, meanwhile, are forecast to increase by between 2% to 3% this year.

BA claims that it has little room for manoeuvre, adding that its staff costs are higher than that of any other European airline.

According to DKW's Mr Powell, a pay deal of 1% above the rate of inflation would add �20m a year to BA's annual �2bn wage bill.

Another city analyst, who declined to be named, said strike action would be hugely detrimental to the airline's reputation both with passengers and investors.