British Airways fell to a worse than expected first-half loss and forecast annual revenue would be GBP1 billion pounds lower than last year.

The airline, whose alliance with American Airlines and Spain's Iberia is being scrutinised by European and US competition watchdogs, on Friday reported a pre-tax loss for the six months to end September of GBP292 million (USD$482.4 million), while revenues fell 13.7 percent to GBP4.1 billion.

BA's pre-tax loss -- impacted by higher debt levels, lower interest rates, a higher pension burden and restructuring costs of GBP48 million -- compares to the pre-tax profit of GBP52 million it made in the same period last year.

The airline said it would look to drive more costs out of the business in the coming months.

"Our revenues are likely to be about GBP1 billion lower this year so we're determined to reduce costs further," chief executive Willie Walsh said.

He added that the airline was "riding along the bottom" of the downturn.

The global recession has battered the airline industry as consumers cut back on trips abroad and lucrative business class travellers fly less. BA has also been hit by growing competition from low-cost carriers and potential strikes.

Walsh also said he was "confident in the strength" of BA's case to win US Department of Transportation approval for a sales tie-up with American Airlines and Iberia.

LESS PESSIMISTIC TONE

BA said passenger revenue fell 13.6 percent, on capacity 3 percent lower, while yields -- the revenue it makes on each passenger for every mile travelled -- were down 12.2 percent.

However, it said both volumes and yields had "started to stabilise", with analysts predicting the worst could now be over for BA.

"These results are a touch worse than expected but the tone is a little less pessimistic than before. That is consistent with the view that BA has reached the bottom of the downward cycle," said Astaire analyst Douglas McNeill.