BA dives into red but Walsh says job’s safe

The extent of BA's losses and the admission that he had followed the wrong strategy over the winter will heap pressure on Willie Walsh, whose three-and-a-half years running the airline has put it in permanent revolution, to deliver his pledge to make the carrier sustainably profitable.

In a statement blaming BA's woes on the global economic crisis, Walsh conceded: "We changed our focus during the fourth quarter [January to March] from driving yields to securing volume as customers became more price sensitive."

The comment is a significant admission from Walsh that his high-risk policy of concentrating on keeping up yields — charging BA passengers more for their tickets — has not worked.

This afternoon, Walsh and finance director Keith Williams announced they will work for no pay in July as part of BA's cost-cutting programme.

The news came after BA offered staff the option of taking unpaid leave or working part-time following today's £401m record losses.

Mr Walsh said: "I want everyone seriously to consider these options. Personally, I do not want extra leave or to work part-time.

"But I certainly want to make a contribution in recognition of the extremely challenging position we face. This is no stunt. I do not easily give up anything I have earned."

Mr Walsh is paid £735,000 a year and Mr Williams gets £440,000.

However, when asked earlier whether his position was becoming untenable, Walsh said: "It's rock solid."

He had aimed to keep BA's fares high, especially in first and business class, the cabins that contribute the majority of the airline's profits.

BA executives had justified the high fares at the half-year results in November, saying the flag carrier offers a premium service compared with other airlines, augmented by facilities at its new home — Heathrow's Terminal 5.

The number of passengers flying at the expensive end of the plane has plummeted, however, down by 17% in recent weeks. Now, says Walsh, BA is prepared to lower its prices to secure more passengers but at a less profitable margin — a volume-driven business model which has made budget airlines like Ryanair and easyJet so successful.

BA's figures for the year to the end of March reveal the extent of the decline at the airline. Between January and March, the airline accumulated quarterly losses of £309 million which equates to losing more than £100 million a month or £3.5 million a day.

A year ago BA made a record £95 million profit in the January-March quarter sending full-year pre-tax profits to an all-time high of £922 million.

That saw BA's profit margins hit 10% for the first time since privatisation two decades ago and prompted it to pay its first dividend since 2001 when shareholder payouts were scrapped because of the post-9/11 crisis — the year BA made its only other annual loss.

However, BA said today the dividend has once more been scrapped.

The depth of the crisis has also prompted BA to give no guidance on the current financial year. It had previously said it expected to make £150 million of losses in the year to next March.

But today it said: "The industry continues to face very difficult trading conditions with considerable uncertainty over the likely timeframe of the global economic downturn.

"Current levels of traffic volume and yield have not improved over the last quarter of last year. We have decided not to issue any new guidance for the half year or the full year because of the difficulty in forecasting revenues."