Terrorist incidents and avian flu have contributed to a ten per cent decline in charter flights at Birmingham International Airport.

The airport made the announcement after higher costs led to a one per cent dip in its annual pretax profit.

"Although we saw some new destinations in Egypt, Morocco and Bulgaria, there was an overall decline of nearly ten per cent in charter activity at Birmingham," said managing director Richard Heard, adding that world events continued to challenge the sector.

For the year ending March 31, the airport reported profit before tax of £29.2 million - down for £29.5 million the year before.

Operating profit was down 2.5 per cent to £35.5 million on turnover up one per cent at £111 million.

Profit before tax was up £400,000 to £19.5 million due to lower interest and taxation charges.

BIA - which is a public-private partnership between West Midland district councils, Aer Rianta International, Macquarie Airports and the Employee Share Trust - said net cost increases had been partially offset by higher passenger numbers, which were up 7.3 per cent up on last year at 9.5 million.

For the first time more than a million passengers used the airport in each of the three summer months of July, August and September and 1.05 million passengers were handled in August - a record for the airport.

There was good news in the scheduled flight sector, with traffic up 16 per cent.

"The key driver of growth in 2005/06 was our expanding presence in the no-frills sector, which also provides the opportunity for further growth in the future," Mr Heard said.

"Our position in the long-haul sector was also strengthened with the introduction of new Air India services to Amritsar/Toronto, and the introduction of double daily services by Emirates to Dubai," he added.

BIA has just closed a formal consultation on its long-term development proposals.

The draft Master Plan includes an extension to the existing runway and a new second runway to cope with a forecast 33 million passengers a year by 2030.

It is currently embroiled in a dispute with Coventry Airport which has expansions plans that BIA fears will jeopardize its own, forcing the two airports to share limited airspace.

Coventry plans to expand its terminal, providing capacity for up to two million passengers.

If the bid fails, it has vowed to significantly increase the freight and business traffic it handles through the airport.

In June, BIA was forced to close after an emergency landing of a TNT freight plane.

Earlier this month the airport was forced to admit that the closure, combined with the World Cup, had contributed to a 7.2 per cent dip in passenger numbers compare to 2005.