ATW Daily News

Short-term improvement will not stop 'record' full-year loss at BA

Monday February 8, 2010

British Airways maintained its stark outlook and warned of "record losses" in its fiscal year ending March 31 despite sharp cost cuts and a better-than-expected third-quarter loss of £37.5 million ($58.9 million), narrowed 52% from the £78 million deficit suffered in the year-ago period.

Fiscal third-quarter revenue fell 11.1% to £2.04 billion while total costs were down 14.1% to £2.01 billion. Passenger revenue declined 11.8% to £1.76 billion and cargo revenue dropped 13.2% to £151 million. BA's operating profit of £25 million was reversed from a £51 million loss in the three months ended Dec. 31, 2008. and represented its first operating surplus since the quarter ended Sept. 30, 2008.

"These results highlight the impact of permanent changes across the company on our costs," CEO Willie Walsh said, while cautioning, "While we are on the right track, we still expect to make record losses this year. Permanent structural change is being introduced in all areas and will return us to sustained profitability."

Walsh said the group achieved £300 million in nonfuel cost reductions in the nine months to Dec. 31, exceeding its initial £220 million target for the full year. CFO Keith Williams indicated a further £50 million in savings should be realized in the current quarter.

For the nine-month period, BA's net loss deepened 92.9% to £245 million from £127 million in the year-ago period. The operating loss of £86 million compared to a profit of £89 million a year earlier. Revenue decreased 12.9% to £6.14 billion against a 10.5% cut in costs. Passenger yield declined 11.1% to 6.18 pence owing largely to lower surcharges and sales mix, although BA noted that its 9.7% slide in premium traffic volume "is significantly better than industry figures as disclosed by IATA." Unit cost was reduced 6.7%.

Walsh was vague regarding BA's progress on completing its merger with Iberia and its transatlantic joint business agreement with IB and American Airlines. He reiterated earlier statements that it is "on track to finalize the merger agreement by the end of the year" and that he remains "confident" of receiving regulatory approval for the JV.

by Cathy Buyck

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