A HAMPSHIRE company that makes aircraft interiors has suffered another performance blow, it emerged today.

As reported by business South last September, AIM Group faced a "difficult future" because of the worldwide downturn in the aviation industry.

Last summer chairman Jeff Smith warned that post 9/11 would be tough because of plunging revenues in the civil airline industry.

That problem was worsened by the war in Iraq, the outbreak of the SARS virus and the weak dollar against the strong pound.

Mr Smith's bleak prediction has rung true with AIM's latest results - and a warning of job cuts on top of those already imposed.

AIM, based at Carlton Crescent in Southampton, recorded an operating loss of £169,000 (2002 £237,000 profit) for the six months ended October 31.

The loss before tax for the period amounted to £448,000 (2002 £215,000 profit) after exceptional items of £145,000 (2002 nil) and interest charges of £134,000 (2002 £22,000).

Sales were £25.4m dividend (2002 £21.9m) for AIM, which has three production sites in Bournemouth, Dorset, as well as sites in Surrey, Derbyshire, Cambridgeshire and the US.

Mr Smith said the operating loss arose "as a result of unexpected losses on certain aircraft galley contracts and an erosion of margin in a declining market, compounded by the weakness of the US dollar in which much of our revenue is based".

He added: "The exceptional loss related to redundancy costs as the group continued to reduce production capacity to match demand."

AIM had some success in diversifying away from civil aircraft, particularly within the railway industry, but the core business is suffering from the massive decline in capital expenditure by the airlines.

Mr Smith said: "Recent announcements of further airline losses, the deferral of orders for new aircraft and the discontinuance of production of the Boeing 757 aircraft are all indicative of current market conditions.

"Deliveries are scheduled to be lower in the second half of the financial year and although capacity has been reduced, further redundancies are possible."