ATW Daily News

BA plunges to £102 million loss, announces 1,200 new job cuts

Monday November 9, 2009

Claiming that "aviation remains in recession," British Airways posted a £102 million ($168.8 million) net loss in the fiscal second quarter ended Sept. 30 that pushed its first-half deficit to £208 million, a nearly fivefold deepening of the £42 million loss incurred during the year-ago period, when it lost £76 million in the quarter ended Sept. 30, 2008.

There are still no "green shoots of recovery" in the industry, CEO Willie Walsh warned, adding, "With revenue likely to be £1 billion lower this year, we can't stand still and further cost reduction is essential." The company will introduce further structural changes in the current semester, including cutting winter capacity by 6% rather than the originally planned 5% and "further manpower reductions of 3,000 by March 2010" in addition to the 1,900 positions already eliminated in the first half. The 4,900 job cuts now planned by the end of the fiscal year on March 31 therefore will include 1,200 in addition to those previously announced. BA currently employs 38,704 workers.

Walsh reiterated that changes to cabin crew working conditions will enter force on Nov. 16 despite a legal challenge from the Unite union, which on Friday stressed that BA's 14,000 flight attendants have not accepted the imposed terms. Results of a strike vote are due on Dec. 14 (ATWOnline, Oct. 27). Walsh said BA will be doing everything it can to "re-engage" Unite but that the company "must continue to reduce our cost base. This is an airline facing structural change and we must respond with a structural change to our cost base."

Fiscal first-half revenue declined 13.7% to £4.1 billion while operating costs dropped 8.7% to £4.21 billion. Operating result for the reporting period, including £48 million in restructuring costs, reversed to a £111 million loss from a £140 million profit last year. Second-quarter operating deficit was £17 million.

Unit cost per ATK fell 5.2% in the first half to 37.98 pence. Excluding fuel and the impact of exchange and restructuring costs, unit costs dropped 5.5%. Traffic revenue per ATK declined 15.7% to 46.83 pence and passenger revenue per ASK was down 10.9% to 4.83 pence. Passenger yield sank 12.2% to 5.99 pence largely as a result of lower year-over-year surcharges and sales mix within cabin class. RPKs dipped 1.3% on a 3% reduction in ASKs, improving load factor 1.1 points to 80.6%.

Walsh also revealed a further delay in deliveries of BA's A380s, with the first aircraft now arriving in 2013. In July, BA said it "extended" the arrival schedule for the first six of its 12 A380s on order by an average of five months and that its first still was expected to arrive in spring 2012, ahead of the Summer Olympic Games in London (ATWOnline, July 7).

Walsh also said BA remains interested in acquiring Lufthansa subsidiary bmi, mainly for its slots at London Heathrow, although it also has identified certain bmi routes that would be valuable to it. Regarding the planned merger with Iberia, he said talks are continuing (ATWOnline, Oct. 15). He repeated that BA "remains confident" on receiving regulatory approval for its joint business agreement with IB and American Airlines and antitrust immunity from the US Dept. of Transportation and the European Commission (ATWOnline, Oct. 27).

by Cathy Buyck

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