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BA said pre-tax profits for the three months to the end of December fell to �113m ($222m), from �166m last year.

The news comes just days after BA reached a last-minute deal with unions to avert a strike by cabin crew.

The planned action would have grounded BA flights from Heathrow and Gatwick airports and caused major disruption for thousands of BA passengers.

BA said it expected to lose about �80m in revenues as a result of the dispute.

'Patience and loyalty'

I want to apologise for the inconvenience they have suffered during this period Willie Walsh, BA chief executive

BA said severe fog before Christmas and the failure of the baggage system on two occasions in December at Heathrow's Terminal 4 had cost the firm about �40m during the final three months of 2006.

Chief executive Willie Walsh said the "patience and loyalty" of BA's passengers had been tested by the setbacks over Christmas.

"I want to apologise for the inconvenience they have suffered during this period," Mr Walsh said.

A planned two-day strike by BA cabin crew was called off on Monday, following marathon talks between the airline's bosses and the Transport and General Workers Union (T&G).

The two sides had been at loggerheads over a number of issues, including pay, pensions and the management of sickness absence.

BA had cancelled 1,300 flights on Tuesday and Wednesday - when the strike was due to take place - but the airline managed to resume services after the deal with the T&G was reached.

However, the agreement came too late to prevent disruption to thousands of BA passengers, many of whom made alternative plans as the planned strike date drew near.

BA said it was cutting its full-year revenue guidance to 3.25%-3.75% growth, compared with a 4.5%-5% forecast in November.

The company added that it expected its fuel bill for the year to rise to �1.95bn.