A glut of low air fares sent British Airways (BA) second quarter profits plunging, figures released yesterday have shown. BA is currently finalising a global alliance deal with Aer Lingus.

Pre-tax profit in the quarter to the end of September fell 83.3 per cent to £40 million sterling, BA said. Operating profits for the first six months fell 51.5 per cent to £211 million. The figures were in line with forecasts. Aer Lingus is negotiating an alliance treaty with BA which will see the State-owned airline ultimately join the OneWorld alliance which includes American Airways. Like most other European airlines, BA's yields have fallen this year after carriers shifted flights to North Atlantic routes in the wake of Asia's financial crisis. That has boosted market capacity above demand, driving down fares and yields. While most airlines have been increasing capacity - which in airlines is measured by number of passengers times miles flown - BA has announced it will cut capacity by 12 per cent over the next three years.

By flying a fleet of smaller planes that hold fewer economy passengers but a greater number of business travellers, BA hopes to boost profitability over the next two and a half years.