BRITISH Airways is being hit by the global economic slowdown as operating profits for the first quarter fell to almost half last year's level.

The group said it had suffered from "weak market demand", particularly in the US, and that the outlook for the rest of the year was challenging.

Passenger numbers were down 11.3 per cent in the three months to June 30, with the foot-and-mouth crisis and a computer glitch also affecting bookings.

Operating profits for the three-month period were £50m, down from £97m in the first quarter last year.

BA has been stripping out capacity, mainly on its trans-Atlantic routes, helping it cut costs and improve the service offered to business class customers.

Chief executive Rod Eddington remained confident that BA would enjoy a strong summer season, but said the winter months might be more difficult.

"The real challenge will come in the winter period. It's too early to say what that period will look like," he said.

Of the economic slump, he said: "I think if one speaks to the economists around the world I don't think anyone is expecting a pick-up until next summer. We will be managing our business accordingly."

Turnover in the first quarter slipped by one per cent, to £2.30bn from £2.31bn last year.

BA sold-off its no-frills airline Go for a £100m profit in June, and this meant pre-tax profits were £40m, compared to a £50m loss in the first quarter last year, when BA made a loss on the sale of French airline Air Liberte.

On Friday, BA unveiled plans for a new alliance with American Airlines in which the two would sell tickets for each other, combine scheduling, share lounges, and recognise each other's frequent flyer programmes.

Yesterday, BA reiterated that the two airlines would be making a joint application to the UK and European authorities within the next few days for anti-trust immunity and regulatory clearance.

Mr Eddington said BA would play a part in consolidation in Europe, but refused to comment on reports that it was keen to buy a stake in Dutch rival KLM.

"I'm not sure how long it will take for meaningful consolidation in Europe, nor will I comment on specific rumours about specific airline carriers.

"But being a player for European consolidation is a major priority for us," he said.