British Airways named Australian airline boss Mr Rod Eddington as its new chief executive yesterday, handing him the task of restoring profitability and morale at Europe's largest airline.

Mr Eddington, who headed Cathay Pacific Airways before leaving in 1996 to put Australian airline Ansett back in the black, had been widely tipped as a suitable candidate to succeed British Airways' controversial former chief executive, Mr Bob Ayling.

Mr Ayling was ousted in March, ending a four-year tenure marred by acrimonious industrial relations and a drop in profitability, which has set the airline on course for its first full-year loss since privatisation in 1997.

The airline is due to post a £250 million sterling (€425.5 million) loss in the year to end March. Its stock has dropped from a peak of 760p in May 1997 to below £3 early this year.

Mr Eddington (49), who is due to take over on May 1st, has his work cut out for him. He will have to oversee BA's transition into a smaller, more business-oriented airline and steer it through a fresh round of cost cuts.

"The board looked for someone with the necessary people skills, someone who knew how to run a large organisation with millions of customers," said BA's chairman, Lord Marshall.

Investors also seemed pleased with the appointment.

The airline's lagging stock closed 1.5 per cent up on 304 3/4p sterling.

The Australian's annual salary will be £500,000, the same as Mr Ayling's.