AIRLINE group Bmi halved pre-tax losses to £9.8m last year despite the impact of the Sars virus and the war in Iraq.

The group, based at Castle Donington, Derbyshire, said last year was another difficult 12 months. But growth in passenger numbers in the second half of the year helped it finish in a much stronger position than it started from.

While losses fell from £19.6m the previous year, trading profits before overheads, interest and one-off items rose to £23.5m from £5.1m previously.

Bmi, which operates daily Teesside to Heathrow services, said the improved performance had carried through into this year, with revenues currently running about ten per cent ahead of last year's figures.

The company said the Sars virus and the war in Iraq cost it £17m in lost revenue last year.

Bmi said the group had given low-cost carriers aggressive competition and the airline's cost-saving initiatives were helping the group return to profitability