A one-off credit resulting from changes to its pension scheme has enabled British Airways to avoid a huge drop in annual profits, after the carrier set aside £350m to pay potential price-fixing fines.

The company yesterday reported a pre-tax surplus of £611m for the year to March 31, down 1% on 2006, after booking a £396m accounting gain resulting from capping pensionable pay in its New Airways Pension Scheme at the level of inflation. The scheme deficit has fallen from £2.1bn to £1.6bn.

In the final quarter of the year, BA posted a pre-tax profit of £27m, down from £98m last year. The result was affected by the grounding of 1300 flights during the period, when cabin crews threatened to strike over pay and sick leave.

BA is under investigation by the US Department for Justice, the European Commission and the Office of Fair Trading over alleged price-fixing of fuel surcharges for long-haul flights and air cargo.

In its results statement, BA admitted staff had broken competition laws over fuel surcharges, stating: "BA has a longstanding, clear and comprehensive competition compliance policy. This policy requires all staff to comply with the law at all times. It has become apparent that there have been breaches of this policy in relation to discussions about these surcharges with competitors."

The carrier said its £350m provision was the "best estimate" of the amounts that could be required to settle all known claims, including government fines and civil actions under way in the US, Australia and Canada.

BA said it had made no final decision about how it would use its 10% shareholding in Spanish carrier Iberia, but reiterated it would not make an independent bid for the airline. It has already approached private equity companies about making a consortium offer.

Chief executive Willie Walsh said BA had encountered some weakness in non-premium travel on the North Atlantic. The group said it expected to come in at the lower end of its 2008 guidance of 5% to 6% revenue growth. Group revenues in 2006-07 climbed 3.4%, to £8.49bn.

"There's definitely an element of the weak dollar," said Walsh. "But the premium market remains quite strong. The domestic non-premium market is another area where we've seen weakness, particularly since the changes in security arrangements."

Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, commented: "BA seems determined to do things the hard way and today's figures summarise a difficult year. A number of events have conspired to test corporate resolve (including) last summer's security alert, the threat of fiercer competition in long haul following the open skies' announcement, labour disputes, PR mishaps (and) the weaker dollar.

"Set against this there are still factors in BA's favour. Its continued focus on increasing margins, especially with regard to its "premium cabin" strategy, the potential which Terminal 5 could bring and, of late, bid speculation surrounding the stock have all combined to give the shares some support."

BA shares closed 14.5p lower at 487p.

l The chairwoman of Australia's biggest airline, Qantas, is to step down from the board in November following a failed £4.5bn takeover bid by a private equity consortium. Margaret Jackson will retire at the annual meeting.

Jackson and other directors, including chief executive Geoff Dixon, have been under pressure to quit following a failed bid by Airline Partners Australia to buy the company earlier this month. The board backed the bid.