Nov. 6 (Bloomberg) -- British Airways Plc said declines in passenger traffic and ticket prices may have turned a corner after the carrier reported a record loss for the first half.

British Airways gained 6.7 percent in London trading after the carrier said premium traffic fell 1.4 percent last month versus a 7.9 decline in September and that volumes and yields, a measure of revenue per passenger, are now stable.

“The tone is less pessimistic than last time they reported,” said Douglas McNeill, an analyst at Astaire Securities in London with a “buy” rating on BA stock. “It may be ugly in headline terms, but the comments are consistent with the notion that this is the bottom of the cycle.”

Europe’s third-largest airline had a net loss of 217 million pounds ($360 million) in the six months ended Sept. 30, widening from 49 million pounds a year earlier. Chief Executive Officer Willie Walsh will slash capacity 6 percent this winter to ensure planes fly fuller while scrapping 3,000 more jobs on top of 1,900 already eliminated and hiring workers on lower pay.

British Airways, which plans to further delay delivery of its first Airbus SAS A380 superjumbo to defer costs, advanced 12.5 pence to 198.8 pence. The stock has added 11 percent this year, valuing the London-based company at 2.29 billion pounds.

Sales fell 14 percent in the six months to 4.1 billion pounds and are likely to decline by 1 billion pounds for the full year, British Airways said in a statement today. That suggests the slide will slow to 8.2 percent in the second half.

Third quarter revenue was 2.12 billion pounds, according to Bloomberg calculations. Analysts predicted 2.16 billion pounds.

Yield Performance

Airlines may lose $11 billion this year, according to the International Air Transport Association, with British Airways suffering a 14-month decline in premium traffic, which accounts for almost half of revenue, as business passengers stayed away. Yields have fallen about 12 percent this year, British Airways Chief Financial Officer Keith Williams said in an interview.

“Yields have been particularly low over the last six months so we are starting to see some traction,” Williams told Bloomberg Television. “We’re now in a stable period.”

The October decline in business- and first-class traffic was the smallest since the collapse of Lehman Brothers Holdings Inc. in September 2008 and also less severe than the 2 percent drop in economy class travel.

Trans-Atlantic Boost

Overall traffic fell 1.9 percent, with the trans-Atlantic market, the company’s biggest, showing a 2.3 percent increase, compared with declines of 21 percent on routes to Asia and 4.2 percent within Europe. BA is the No. 1 carrier between Europe and North America and deploys 40 percent of capacity there.

The airline’s first Airbus A380 will now join the fleet in 2013, it said today. The delivery schedule for the first six of 12 jetliners on order had already been delayed by an average of five months.

The planes will be handed over at a rate of three a year through 2016, according to British Airways spokeswoman Cathy West, who added that orders for 24 Boeing Co. 787 Dreamliners, which begin 2012, and six Boeing 777s aren’t affected.

“I remain optimistic that we can manage our way through this period but, it’s absolutely clear that we must continue to reduce our cost base,” Walsh said on a conference call, adding that the carrier will press on with cost-cutting measures including a reduction in cabin crew numbers on long-haul flights that’s aimed at shaving 140 million pounds from annual expenses.

Strike Threat

British Airways faces its first strike in more than a decade over the issue after last month bypassing the Unite union, which represents 96 percent of 14,000 flight attendants, to agree the equivalent of 1,700 job cuts. Unite yesterday failed to win an injunction blocking the introduction of new practices on Nov. 16.

“Any talk of industrial action is still premature,” Walsh said today. “We’ve still not been informed of the intention to conduct a ballot.”

Walsh’s savings plans include the elimination of 1,200 overseas posts in addition to 3,700 domestic job cuts already announced. The new positions will include some cabin crew employed abroad, spokeswoman West said by telephone.

The carrier said talks on an all-share merger with Iberia Lineas Aereas de Espana SA are continuing, and Iberia shares rose 7.3 percent before trading up 4.9 percent at 2 euros.

British Airways is also awaiting the U.S. Department of Transportation’s verdict on a proposed alliance with the Spanish carrier and AMR Corp.’s American Airlines on lucrative trans- Atlantic routes.

“We remain confident that we have a very strong case and that the merits of our arguments hold up,” Walsh said of the antitrust application.

British Airways said its main pension plan has a deficit of about 2.66 billion pounds, up from 1.17 billion pounds in March. Nick Cunningham, an analyst at Evolution Securities in London, said he’d estimated a pension gap of 3 billion pounds and that the figure reported today is “quite helpful” to the airline.

To contact the reporter on this story: Steve Rothwell in London at srothwell@bloomberg.net

Last Updated: November 6, 2009 12:19 EST