UPDATE 2-British Airways hit by higher fares, UK slowdown

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By John Bowker

LONDON, July 3 (Reuters) - British Airways (BAY.L) said on Thursday its traffic fell 3.7 percent in June, as a hike to ticket prices and the UK economic slowdown put passengers off travelling on both business and economy flights.

The figures compared with a 0.7 percent fall in May, and were worse than the 1.5 percent drop forecast by analysts at Citigroup last week.

"UK consumers are reluctant to spend more, and seeing as fares have risen there will be some effect (from that), but it's hard to attribute (the decline) to one or the other," BA Head of Investor Relations George Stinnes told reporters.

Gert Zonneveld, transport analyst at Panmure Gordon, said a general fall in traffic had been anticipated by the market.

"We were expecting a decline in premium and non-premium traffic, and we got one," he said.

BA said the group's core premium, or business class, passengers fell 3.1 percent year on year, while economy fares were down 3.8 percent.

The airline's load factor -- a measure of how well it fills planes -- fell 3.8 percentage points to 76.7 percent.

BA raised ticket prices via a fuel surcharge last month, and Stinnes said the group would not rule out further hikes despite the impact on passenger volumes.

"In a period of two months brent crude oil prices have risen from $110 per barrel to $147. Surcharges don't cover the full increases but we have to try to cover costs," he said.

He added that there was too much capacity across all markets as the industry faces the twin threats of high fuel costs and slowing demand, and that BA was close to announcing details of cuts to its winter programme.

(Reporting by John Bowker; Editing by Mike Elliott/Elaine Hardcastle)