BRITISH AIRWAYS (BA) yesterday reported its first operating loss for the early summer months, as its most lucrative long-haul business passengers cut back sharply on travel or traded down to cheaper tickets.
In the midst of what airlines claim is the worst crisis in aviation history, the struggling UK flag carrier said it had fallen from a pretax profit of £37 million (€43.4 million) a year ago to a pretax loss of £148 million in its first quarter from April to June.
BA is also being hit by the slump in air cargo as the world economy contracts. Its cargo revenues in the three months fell by 28 per cent year-on-year amid excess capacity and falling freight rates.
Total revenues dropped by 12 per cent from £2.26 billion to £1.98 billion, but fell by 16.8 per cent on an underlying basis, excluding the impact of changing foreign-exchange rates.
BA chief executive Willie Walsh said trading conditions continued to be “very challenging” and there were “no visible signs of improvement”.
Japan’s All Nippon Airways yesterday also joined the large group of European and Asian carriers reporting growing losses this week and said it had fallen to a loss of 29.2 billion yen (€216 million) in the three months to the end of June from a profit of Y6.6 billion a year ago. The outbreak of H1N1 flu is having an impact in particular on routes to China.
BA said its traffic volumes were down considerably from last year but at least the rate of decline was no longer worsening during the quarter. It forecast the declines could be lower in the peak summer months. Yields, or average fare levels, remained “volatile”, however. In many cases airlines are only managing to fill seats by discounting fares.
Mr Walsh said BA was performing slightly better than some of its main rivals, as it took a lead in cutting costs and as its fuel bill reduced in response to the fall in the oil price from the record peak a year ago and in response to the reduced flying programme.
BA shares closed 8.1p or 6 per cent higher at 142.4p. Fuel costs for the quarter were down by 15.6 per cent. BA said at current fuel prices and exchange rates its fuel bill for the full year to the end of March 2010 was expected to fall by £450 million to £500 million, or up to 25 per cent.
BA is caught up in tough negotiations with its trades unions over further significant job losses and a cut in terms and conditions, as it struggles to improve productivity.
It has cut 4,000 jobs (on a full-time equivalent basis) in the past 12 months and wants to cut a further 3,700 jobs. – (Copyright The Financial Times Limited 2009)
