BA's new CEO says profit target may not be met this year |
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Wed, 05 Oct 2005 06:05
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LONDON: British Airways new chief executive Willie Walsh says the airline may not be able to achieve its profitability goal of 10 per cent this year basically because of high fuel prices.
Walsh, who took over as the CEO of Europe's third largest airline over the weekend, replacing Rod Eddington, outlined his priorities for the coming year -- making significant investments in the Club World cabin, in-flight entertainment and the ba.com website. He said the intended investment will be 100 million pounds.
He said if the fuel prices had not risen to record levels, the airline would have achieved the profitability target. BA had reported an 8.5 per cent operating margin in the first quarter ending June, but fuel costs have gone up substantially since then.
He said there will not be any forced job cuts, although the airline has set a target to reduce labour costs by 300 million pounds by end-March 2007. BA is set to adopt new technology as it moves to a new terminal at Heathrow in 2008, which industry watchers feel, could lead to job cuts.
Walsh, formerly with Aer Lingus, is known for his cost cutting measures and hard talk with the unions.
Walsh said he would give priority for labour relations in the airline, which is experiencing industrial unrest at London operations. "We expect to have all of our processes, work practices, agreed and ready to implement by the end of 2006," he said.
He said the new terminal offers a lifetime opportunity to provide a world-class service for customers and to work with the unions in a way that is relevant to the 21st century. There is scope for efficiencies all across the airline and it is necessary to ensure the airline's financial viability and invest in the future.
The airline intends to bring in changes in its regional short-haul business. It will retain a two-class service on short-haul flights.
Walsh said BA has no plans to increase its stake in Spain's Iberia or any merger with a dominant a U.S. airline. In clarification, he said American Airlines remained an "excellent partner".
BA has no plans immediately to add to its fleet strength, but it is evaluating a range of new models including Boeing 787, 777 and the proposed 747 Advanced, and Airbus A350 and A380.
Walsh is hopeful that there will be 'open skies' agreement between airlines in Europe and U.S. in about 18 months. However, he added that a genuine 'open skies' is not possible when there is an imbalance in rules between the EU and the U.S. (a clear reference to US airlines securing bankruptcy protection under Chapter 11).
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