British Airways posted a surprise third-quarter operating profit, reflecting the impact of deep cost cuts and capacity reductions, and said it had adapted to industry changes caused by the global recession.
The British flag-carrier on Friday reported an operating profit of £25 million in the three months to the end of December, well ahead of analyst estimates that it would post a loss of loss between £90 and £100 million.
Shares in BA, which have risen by a fifth in the last three months as its merger with Iberia nears, were up 1.3 per cent at 214.0 pence by 8.50am, valuing the airline at around £2.5 billion.
"These results highlight the impact of permanent changes across the company on our costs," BA chief executive Willie Walsh said.
"Those changes, combined with capacity reductions and external spending cuts, mean operating costs are down by 10.5 per cent and show that we've adapted quickly to the new business realities created by the global recession."
Rival Air France recently said business was stabilising but the chief financial officer of Deutsche Lufthansa last month said some analyst estimates for 2010 were too high.
However, Finnish national carrier Finnair today reported wider fourth-quarter losses and said it expected to make a loss in the first quarter this year.
Analysts had expected BA to report a third-quarter operating loss of between 90 and 100 million pounds.
"The result was a pleasant surprise and is a remarkable turning of the corner," said Evolution analyst Nick Cunningham.
Non-fuel costs were down and largely came from savings in employee, engineering and selling costs.
BA's operating loss came in at £86 million for the first nine months of the year, sharply down from a profit of £89 million it made in the same period a year ago, while revenues fell 12.9 per cent to £6.14 billion.
BA is expected to report a record full-year pretax loss of £627.76 million, according to the average from a Thomson Reuters I/B/E/S poll of 17 analysts.
The International Air Transport Association (IATA) last week said the aviation sector would face a tough 2010 making up for the lost demand in 2009 and handling new security demands.
BA said its yields - the revenue it makes on each passenger for every mile travelled - fell 8.8 per cent in the third quarter, reflecting lower surcharges and cabin class sales.
Yields were 11.9 per cent up in the same quarter last year.
"Long-haul premium yields have recovered to 2007 levels and show recovery. Yields in non-premium cabins have some way to go before they recover and short-haul yields have not recovered to the extent we have seen elsewhere," said Mr Walsh.
The airline said it carried 7 per cent fewer passengers in January year-on-year. The number of its premium, or business class, passengers fell 2.1 percent year-on-year, while non-premium traffic fell 7.9 per cent on the same month last year.
BA, which said its merger agreement with Spain's Iberia would be finalised by the end of the year, added that
it was confident of receiving regulatory approval for its proposed transatlantic tie-up American Airlines and Iberia.
Low-cost rivals easyJet and Ryanair recently raised their profit forecasts and said they were still taking market share from leading flag carriers such as BA and Air France-KLM.
Reuters