The new boss of British Airways said the airline would not achieve a key profitability goal this year and flagged a £100 million investment to win back long-haul customers.
The money would be ploughed into new businessclass seats and in-flight entertainment amid pressure to improve customer service.
But chief executive Willie Walsh would not rule out forced job cuts as BA prepares to consolidate its London operations in a new terminal at Heathrow.
Mr Walsh said the carrier would not achieve its goal of a ten per cent operating margin, a target set by his predecessor, this year, due to record high fuel costs.
He said: "I do believe it is achievable. With fuel prices where they are we clearly are flying into very significant headwinds. I don't have a date in mind when we will achieve it."
The airline notched an
8.5 per cent operating margin in the first quarter of the current year. The former boss of Aer Lingus replaced outgoing chief Rod Eddington to head Europe's third-largest airline over the weekend.
Labour issues will be a top priority for Mr Walsh ahead of the airline's move into a single terminal at London's Heathrow Airport in 2008 which is expected to result in thousands of job losses.
The airline currently operates from two terminals at Heathrow while the company is targeting a £300 million reduction in labour costs by March 2007.
Mr Walsh declined to confirm reports it hoped to reduce the size of its 46,000-strong workforce by 15 per cent under the move.
Despite an industrial dispute at its caterer Gate Gourmet which spilled over into a sympathy strike by BA staff last month, Mr Walsh said there were no plans to cut catering from any BA services.
Mr Walsh said most staff were "very angry" about a walkout by some BA workers that grounded flights last month.
"We cannot put up with that sort of activity going forward."
Mr Walsh also said consolidation was not an immediate
priority until there were regulatory changes in the airline industry, signalling there were no plans to lift its stake in Spain's Iberia. He said American Airlines remained an " excellent" partner.
Mr Walsh also said there were no immediate plans to buy new aircraft but the carrier was evaluating a range of models, including the Boeing 787, 777 and the proposed 747 Advanced, as well as the Airbus A350 and A380.
* Airbus said it delivered 271 jets in the first nine months of 2005, up from 224 units a year earlier. Airbus said last month it expects to deliver 360-370 planes in fullyear 2005, more than 400 in 2006, and "significantly" in excess of that figure in 2007.