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Costs are falling and its aircraft are flying fuller, but British Airways (BA) today said it has yet to turn a corner in the worst airline slump on record.
The flag carrier today reported the worst-ever, half-year loss in its history.The £292 million crash into the red which includes £48 million of restructuring costs in the six months to the end of September, compares to a £52 million profit in last year's same period — traditionally the airlines' strong trading season.
A horrendous winter last year left BA nursing losses of £401 million in the financial year to the end of March, and the bet in the City is that with another tough winter ahead BA is heading for its worst full-year figures ever.
However, data from the airline today indicated BA is finally getting on top of the mismatch which has seen the airline flying too many aircraft at too high a cost with too few passengers.
“We cut our flying capacity in the summer by 3.5% which is offsetting the rate at which our passengers numbers have fallen — 1.9% last month,” said finance director Keith Williams. “That means are aircraft are flying fuller with load factors at more than 80%.
“What we have done is to better-match supply and demand. And what we are seeing now in long-haul premium [first and business class], one of the main engine drivers of British Airways, is that yields [the per-passenger revenue] have flattened though they are still 10% lower than where we were two years ago.”
The cutting of 1900 jobs in the six months has accelerated the fall in operating costs at the airline to 8.7% from a rate of 6.6% reported earlier in the summer and fuel costs this year have tumbled 18% against the record highs seen during the summer of 2008.
While the City reacted to today's news with a 2% rise in the share price, Williams warned BA is not out of the woods.
“We are still in a difficult environment and we expect our revenues to be down £1 billion this year,” he said. “What we can do is continue to improve costs to take account of this revenue environment.”
That means another 3000 job cuts this winter and controversial changes in working practices from the middle of this month which the unions are threatening to counter with a Christmas strike.
“We've had no notification of a ballot for industrial action,” said Williams.
Reader views (16)
I am obviously a lone voice. I like BA, for all the problems. Put more bluntly, I like my free drinkies. Is this enough to make me fly with them? Yes - isn't it tragic? I hate having to get my chnage out on AA (aptly named) or the low-cost lines. One other thing: I was treated not very well at Toulouse airprt by BA, so I complained directly to Willie Walsh's email - and he had the decency to respond personally, giving me some air miles. I don't think BA is at all perfect, but I still trust them and feel happy flying with them.
- Richard, London, UK
Willie Walsh, wrong man for the job.
- Andy Davids, London
I would personally have no faith in a manager who has Willy Walsh's hairstyle...but seriously, there is too much airline capacity at the moment-something has to give. And it's not as if flying was a remotely pleasant experience now, compared to the days of uncrowded airports, super cabin service, and wonderful machines like the Stratocruiser, Constellation, 707, and original 747 with upstairs bar. So, best to go by train or ship or stay at home now.
- Jon Kent, Hertford. UK
British airways has just lost out to Air France KLM,the latter have the new Airbus A380 which BA will not have for several more years,if they get one.
BA was the worlds favorite airline,now?
Maybe BA should merge with the other 2 main British airways,they could then compete against the others and call themselves British Virgin Airways.
- David Nigel Braham, Milan Italy
We had always found the staff on BA flights - London/Dallas to be very obliging, until we came across one person within London Heathrow airport itself who, in two minutes, took that away. He was rude, dismissive- we were both so shocked that even when we wrote/telephoned to BA Customer Department, where the staff were pleasant enough,the staff basically told us, when I mentioned sending a letter from our attorney setting out our complaint, that "They get letters all the time" - and just basically laughed in our faces.
We have nothing aqainst the hard working people within BA but after that episode - we do not want to have anything more to do with BA. Maybe the people who run BA should get the treatment that we had....and see how they like it.....
- Elizabeth Taylor, Dallas TX
As a frequent long and short haul flyer, who regularly used BA , and still fly Business Class or Economy according to the circumstances, I work on the basis of "ABBA"- "Anyone But British Airways". It works well. I end up with airlines that don't hate me! Next month I fly American and SwissAir up-front. Neither demand extra fees....and everyone smiles!
- Don H, France
£290 million? That'll be Willy Walsh's severance package for his failure!!
I'm flying with BA next week (God help me), if they're still operating. I'm booked with someone else inbound as I'm not so sure they will be in a few weeks.
- Kerry, Purley
BA's arrogance knows no bounds does it ? I wish I'd sold my shares when they were over £3 a pop when Rod Eddington was CEO.............
- Andy Woodhead, London, ENGLAND
Willie Boy should have gone long ago. He has no idea at all. Why the shareholders tolerate him is beyong me.
- Frederick, London
Don't blame the unions Mark - it's terrible, short-termist management over the last 20 years that's to blame for the mess that BA is in today. From disastrous attempts to merge with larger airlines, to the Heathrow new terminal fiasco, to the stupidity of building and then selling low cost airline Go (which could have been the future business model for the whole airline)- all the major mistakes at BA have been due to poor leadership. Don't blame the poor souls who work there for that!!!!
- Nick, Battersea
BA were the 1st airline to cut out agents commision ,,, yes thats right they expected there loyal agents to work for nothing ,,
i feel sad for the staff abut not ba...
NOW i guess they want the agents support ,, OH YES!
- Kd Mawer, herts
After the failure of the Walsh strategy, it seems to me that BA is essentially a directionless business with no model in place to return the company to health, and a CEO whose idea of cost management is a randon slash and burn, in the hope that customers won't notice thus keeping revenues stable.
How much more time and pain will BA shareholders allow Walsh to turn BA into his very own AER LINGUS MKII ?
- John, Twickenham
BA could have avoided this mess if they had cut costs earlier and reduced their prices a long time ago. Someone tell them they cannot expect passengers to fly
BA and pay a lot more than BA's competitors. BA have been
sleeping at the wheel for too long. Their business model
is out dated. If they had been in any other business they would have been bankrupt by now. The measures they will need to take now will be far greater than the measures they could have made 12-18 months ago.
- Frank, Copenhagen, Denmark
I was a victim of BA cuts on a flight to Tunis from London six weeks ago. I hadn't had any lunch at the airport, thinking I'd get some on the plane. I got a slimy whitebread sandwich and one gin and tonic, ona near-three hour flight. And I was charged excess baggage because there was no real facility to switch weight from one case to another.
The experience felt like ryanair (yeeuch!) than a full-fare scheduled airline. Suffice to say I won't be flying BA again in a hurry.
Which is why their cost-cutting (while not fare-cutting) will backfire.
- David Short, Tunis, Tunisia
It appears that the last 3 BA Chiefs had similar problems....The Unions appear to have a stranglehold and don't seem to care if BA goes bust...Look at the most successful Companies out there. Are they controlled by Unions?, No...I would glady work for BA tomorrow as a non Union member and I bet I could save them a £1m in the 1st Year!
- Mark, London
WHEN WILL BA WAKE UP AND SMELL THE HORRIBLE COFFEE!?
its not the airline industry that is to blame but BA(d) Management. Their business model is appauling, concentrating on a falling market (premium & first class) They are struggling to fill these seats because of the costs, why not slash the price in half. A business or first class seat to New York for say £350, I know thatd would appeal to many and could be a big money spinner. Snobby toffy BA would never dream of taking these steps and its the BA(d) management that will drag this airline into administation.
- Alan C, London
