British Airways, Europe's second-biggest airline, said yesterday annual operating profit rose 33 per cent after cost cuts and a recovery in business travel offset high fuel prices and lower fares.

The carrier reaffirmed forecasts for improved revenue growth in the current year but said its fuel costs would rise by £400 million, up from £300 million tipped previously, due to rising oil prices.

"For the year to March 2006, total revenue is expected to improve by four to five per cent, up from three to four per cent due to the impact of the latest fuel surcharges," Chairman Martin Broughton said in a statement.

The carrier said operating profit for the year to end-March 2005 was £540 million compared to £405 million last year.

The result was well above the median of eight analyst forecasts of £506 million, according to a Reuters poll. British Airways had placed the consensus for operating profit at £518 million.

Pre-tax profit was £415 million compared to £230 million last year. No dividend was declared. BA cut its external spending by £300 million during the year and used technology, including online bookings and self-service check in, to improve efficiency.

However, fuel and oil costs leapt 22 per cent for the year to £1.128 billion. US crude hit a record high of $58.28 in early April. BA and other airlines have been forced to introduce levies on ticket prices to help compensate for the increase.

Chief Executive Rod Eddington has axed 13,000 jobs, simplified the airline's fleet and reduced debt during his tenure at BA. Eddington is stepping down at the end of September and will be replaced by former Aer Lingus boss Willie Walsh who joined the carrier last week.