British Airways announced Friday its annual pre-tax profits of 611 million pounds (1.2 billion dollars) after the company set aside some 350 million pounds for potential fines in connection with the controversy surrounding the allegations that the airline broke competition law over fuel surcharges.

"Policy requires all staff to comply with the law at all times," it said in a statement about anti-competitive activity. "It has become apparent that there have been breaches of this policy in relation to discussions about these surcharges with competitors."

"As a result it is now appropriate for the company to make a provision of 350 million pounds in its full year accounts," it added.

Last summer reports emerged that BA had been discussing the issue of fuel charges with its competitors. As Britain's Office of Fair Trading and the US Department of Justice are still investigating the case, the provision was set aside to cover any fines and any liability if criminal action should follow.

"Members of our staff breached our comprehensive policies on competition compliance rules," chief executive Willie Walsh said Friday. "I find that very regrettable and completely unacceptable," he added.

Walsh said the results were " strong" in what had been "a challenging year", which saw sales up 3.4 per cent to 8.49 billion pounds.

Annual pre-tax profits up to March 31, 2007, were down 0.8 percent compared with last year's result of 616 million pounds, BA said. Operating profits slumped 13 percent to 602 million pounds due to a streak of negative events, including a threatened strike, terrorism threats and weather-related problems, BA said.