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BA shares take flight after historic loss
31.07.09
Shares in British Airways jumped more than 5% as the City decided the very worst could be over for the airline.
As expected, BA recorded a first-quarter loss for the first time in its history reporting a swing from operating profits of £34 million to losses of £100 million in the three months to end-June. Underlying revenues dropped 17%.
The carrier's chief executive Willie Walsh said: "The industry continues to face very difficult trading conditions with considerable uncertainty over the likely timeframe of the recovery from the global economic downturn."
BA's losses come in the same week that Air France-KLM. Lufthansa and Singapore Airlines reported huge losses but low-cost carriers Ryanair and easyJet remained in profit. Walsh said: "Underlying volumes and seat factors have stabilised during the first quarter and are expected to improve in the peak summer months.
"Yields will be under pressure from the year-on-year impact of lower fuel surcharges, exchange movements and the mix of business and leisure passengers. Yield uncertainty continues to make revenue forecasting difficult."
But analysts welcomed the stabilisation and potential upturn.
BA is raising £680 million from the City and today announced that it will cut capital spending by a fifth this year from £725 million to £580million largely by delaying new aircraft deliveries.
Walsh said he still wants to merge with Spanish airline Iberia and had recently held a "constructive meeting" with its new management.
Reader views (4)
My dog is limping: should I phone the City to know why or how ? Question what does someone in the City know about airline companies future...have they got some sort of Cristal ball ?
- Edouard, Toulouse, France
The national carrier deserves our support.
BA standards of safety, reliability and courtesy are unsurpassed. BA employs a huge staff under fair conditions of employment.
In Australia we have news reports of excessive hours worked by pilots of a major middle Eastern airline. This follows a near calamity where a flight departing Melbourne for the Gulf was unable to lift off because of a mistaken load factor. The pilots have referred to the authoritarian and unapproachable management structure.
The fact is the British are good at running airlines.
Where BA is deficient is in failing to establish a cut-price subsidiary to meet the demand of the secondary market, rather as Qantas has been saved from similar decline by its operation of Jetstar both internally and internationally.
The BA brand could carry its reputation for safety and reliability to a "no frills" alternative.
That way, maintenance and aircraft purchasing could be
justified by a wider market approach.
Let's face it.
Airline travel is bound to increase over the next decade.
No need for BA to damage its longer term prospects, just hang in there!
- Gh, Lara, Australia
As repoted over the weekend, At BA, a senior stewardess, who asked not to be named, said the current management was "destroying the loyalty and dedication of staff with a high-handed attitude to negotiations". She said the company was using the recession to cut terms and conditions and "to break the union", with little attempt to take on board the views of staff on how to save the business.
- Frank, Copenhagen, Denmark
All very well - but what is going to be done to compete with the superior service and value of its competitors. Purchasing new aircraft and keeping a young fleet is one way of managing the risks of flying. Is delaying delivery, as many airlines are know doing, playing with our safety. Will there be a spike in aircraft accidents, as activities aimed at reducing risk are reduced, in these tougher times?
- Mr Pastry, Brisbane
