BA half-year profits nosedive in turbulent environment
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Fri, 07 Nov 2008 12:40
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London - Pre-tax profits at British Airways (BA) slumped by nearly 92 per cent to just 52 million pounds (83 million dollars) over the summer period - "one of the bleakest on record" the airline said Friday. Half-yearly profits between April and September were down from 616 million pounds for the same period in 2007 after fuel costs increased from 511 million pounds to 1.5 billion pounds, the airline said. BA expects fuel costs for the whole of the financial year, ending March 31, 2009, to be around 3 billion pounds. While revenue increased by 6.4 per cent to 4.75 billion pounds, the airline's operating profit shrunk to 140 million pounds from 567 million pounds versus the same period in 2007. "This is a good performance given the incredibly difficult trading conditions," BA chief Willie Walsh said. "The six-month period will be remembered as one of the bleakest on record," he added. However, the airline had made "good progress with plans to offset the difficult conditions" and was "on track and focused on achieving a small profit in the financial year," said Walsh. BA was ready to deal with falling demand by cutting capacity, said Walsh, as figures showed a 5.6-per-cent fall in passenger figures in October, to 2.84 million customers. BA planes flew 77 per cent full last month compared to 80 per cent in October 2007, with domestic and European routes most affected by the dip. In March, BA presided over the misery of a chaotic opening of its new Terminal 5 (T5) at London's Heathrow airport, with delays, cancellations and lost luggage compensation costing the airline 4.3 billion pounds. BA said it would reduce its numbers of flights by about 1 per cent for the 2009 summer schedule, affecting services to Dhaka in Bangladesh and Calcutta in India. Plans for the 2009/2010 winter will be made over the next few month and will be dependent upon industry developments. "I fully expect to see a number of other airline failures and that will take capacity out of the market," said Walsh. He said that BA had signed a joint business agreement with Spanish carrier Iberia and with US carrier American Airlines and expected the tie-ups to be given regulatory approval next year. BA said it was conducting a major review to simplify the business, reduce costs and remain competitive. It also pointed to plans to reduce its capital expenditure for this financial year from the originally projected 650 million pounds to 550 million pounds. Walsh said that a previously announced 35-per-cent reduction in management positions was being implemented and that planned "headcount reductions" following the move to T5 were also proceeding. "All other aspects of the business are under review," he said. Despite the sharp dip in profits, BA shares rose by around 15 per cent on the London stock market as investors welcomed the company's forecast of a small profit in 2008.
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