British Airways said on Wednesday its traffic fell by 1.6 percent in August, led by a slump in economy passengers.

The airline, which says current trading conditions are the worst ever, said the volume of business class flyers edged up on last year but those who fill the cheaper seats shied away following recent ticket price increases and teething problems at Heathrow's Terminal 5.

"Market conditions for the industry remain very difficult, with the strong dollar largely offsetting the benefit of the recent fall in oil prices," it said in a statement.

"The outlook for premium bookings is uncertain as forward booking patterns for business travel develop after the summer break."

BA has recently added surcharges to tickets to cover the rising cost of fuel. It has also announced plans to merge with Spanish rival Iberia, a deal that has spawned a three-way transatlantic alliance with American Airlines.

The British airline said its load factor dropped over 2.7 percentage points to 77.3 percent during the month.