British Airways (BA) has announced that it expects to report "record losses" for the current financial year, despite narrowing pre-tax losses and posting an operating profit in Q3.

During the three months ending 31 December 2009, the British flag carrier revealed that cost reductions helped it to record an operating profit of £25m, compared with an operating loss of £51m for the same period in 2008.

The operating profit for the third quarter was the airline's first since Q2 in 2008, helped by a 10.5 per cent reduction in operating costs and a 19.2 per cent decline in fuel costs.

BA reduced its pre-tax losses for the third quarter of 2009 by nearly 60 per cent to £50m, compared with £122m in the previous year, but is still facing tough challenges due to the recession and a £3.7bn pension deficit.

Willie Walsh, the airline's chief executive, said: "While we are on the right track, we still expect to make record losses this year. Permanent structural change is being introduced in all areas and will return us to sustained profitability.

"In November, we signed a binding Memorandum of Understanding with Iberia for a proposed merger and are on track to finalise the merger agreement by the end of the year."