BA falls to loss and warns of further cuts
By Kevin Done, Aerospace Correspondent
Published: February 6 2009 08:54 | Last updated: February 6 2009 11:40
British Airways reported a loss for its third quarter and in the first nine months, and warned the deficit would deepen for the full year.
The airline said on Friday it was reviewing “every aspect of the business to control costs” and had opened discussions with the trade unions “about pay and productivity”, which was required to improve its financial performance.
It said the current weak economic environment was driving “a need for significant cost reduction, as revenue growth will be difficult.”
BA recently removed around one-third of around 1,400 management positions with severance costs of £40m. A wider round of restructuring is expected shortly with further job cuts.
It said the airline industry continued to face “very difficult trading conditions on the back of a weak economic environment.”
BA shares rose 3 per cent to 131.4p in London trading.
The plunge in demand for travel from premium business travellers, one of the most important sources of profits at BA, had worsened in the current fourth quarter with premium passenger traffic dropping by 13.7 per cent in January, it said.
Cargo traffic fell by 16.7 per cent year-on-year in January reflecting the rapid weakening of world trade.
BA repeated its forecast for an operating loss of £150m in the 12 months to the end of March, its first loss since 2001-02. Willie Walsh, chief executive, said the results had been hit by “further economic weakness and the fall in sterling.”
The airline reported a £70m pre-tax loss in the nine months to the end of December, a precipitous fall from a record pre-tax profit of £816m in the same period a year ago. The net loss totalled £127m compared with a profit of £642m a year earlier.
Operating profit for the first nine months fell 88 per cent from £744m to £89m, despite a 6.2 per cent rise in revenues to £7bn. Sales had benefited from the weakness of sterling and price increases that offset volume falls.
Mr Walsh said costs were up by more than £1bn in the period at £7bn, reflecting the significantly increased fuel charges and the impact of weak sterling. Fuel costs increased by 48 per cent to £2.2bn. Non-fuel costs rose by £335m to £4.7bn.
As part of actions to offset “the unprecedented economic conditions”, BA said it had increased its sales activity in markets with stronger foreign currencies to benefit from exchange. It was also competing on fares in both premium and non-premium cabins in an effort fill seats.
Overall in January, BA said it had cut passenger capacity by 2.6 per cent from a year ago while passenger traffic had fallen by 1.3 per cent, including the 13.7 per cent decrease in premium traffic and a 1.4 per cent rise in non-premium traffic.
Cash holdings fell by £278m to £1.6bn between March and the end of December last year, while net debt increased by £900m to £2.2bn with £600m of the increase due to currency factors.
The airline held committed loan facilities of £2.4bn, secured before the worst of the credit crunch, to finance aircraft purchases to December 2012.
Copyright The Financial Times Limited 2009
By Kevin Done, Aerospace Correspondent
Published: February 6 2009 08:54 | Last updated: February 6 2009 11:40
British Airways reported a loss for its third quarter and in the first nine months, and warned the deficit would deepen for the full year.
The airline said on Friday it was reviewing “every aspect of the business to control costs” and had opened discussions with the trade unions “about pay and productivity”, which was required to improve its financial performance.
It said the current weak economic environment was driving “a need for significant cost reduction, as revenue growth will be difficult.”
BA recently removed around one-third of around 1,400 management positions with severance costs of £40m. A wider round of restructuring is expected shortly with further job cuts.
It said the airline industry continued to face “very difficult trading conditions on the back of a weak economic environment.”
BA shares rose 3 per cent to 131.4p in London trading.
The plunge in demand for travel from premium business travellers, one of the most important sources of profits at BA, had worsened in the current fourth quarter with premium passenger traffic dropping by 13.7 per cent in January, it said.
Cargo traffic fell by 16.7 per cent year-on-year in January reflecting the rapid weakening of world trade.
BA repeated its forecast for an operating loss of £150m in the 12 months to the end of March, its first loss since 2001-02. Willie Walsh, chief executive, said the results had been hit by “further economic weakness and the fall in sterling.”
The airline reported a £70m pre-tax loss in the nine months to the end of December, a precipitous fall from a record pre-tax profit of £816m in the same period a year ago. The net loss totalled £127m compared with a profit of £642m a year earlier.
Operating profit for the first nine months fell 88 per cent from £744m to £89m, despite a 6.2 per cent rise in revenues to £7bn. Sales had benefited from the weakness of sterling and price increases that offset volume falls.
Mr Walsh said costs were up by more than £1bn in the period at £7bn, reflecting the significantly increased fuel charges and the impact of weak sterling. Fuel costs increased by 48 per cent to £2.2bn. Non-fuel costs rose by £335m to £4.7bn.
As part of actions to offset “the unprecedented economic conditions”, BA said it had increased its sales activity in markets with stronger foreign currencies to benefit from exchange. It was also competing on fares in both premium and non-premium cabins in an effort fill seats.
Overall in January, BA said it had cut passenger capacity by 2.6 per cent from a year ago while passenger traffic had fallen by 1.3 per cent, including the 13.7 per cent decrease in premium traffic and a 1.4 per cent rise in non-premium traffic.
Cash holdings fell by £278m to £1.6bn between March and the end of December last year, while net debt increased by £900m to £2.2bn with £600m of the increase due to currency factors.
The airline held committed loan facilities of £2.4bn, secured before the worst of the credit crunch, to finance aircraft purchases to December 2012.
Copyright The Financial Times Limited 2009