British Airways could be set for tough times

Nick Raynor, Investment Adviser at The Share Centre comments on how British Airways could be set for tough times, despite announcing strong results: "British Airways (BA) has today reported an impressive 45% rise in annual profits but the year ahead is set to be a turbulent one.

Investors may be cheered by receiving their first dividend since 2001 (5p for the year to end-March 2008), but BA will struggle to impress those affected by the airline's shaky start at Heathrow's Terminal 5.

"In view of this we strongly expect next year's profits to be affected, especially when you take into account escalating crude oil costs (prices have risen from $58 per barrel in the first quarter last year to around $115 this year) and widespread belt tightening which may drive many holidaymakers to more budget airlines.

"One positive outcome is that having once being talked of as ‘prey' for private equity firms, things have improved for BA and it is rumoured to be joining up with other European airlines. Short term investors may want to hold on for further gains, but longer term investors may want to take flight."