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Air fares set to soar as BA profits fall by 90%
Robert Lea01.08.08
British Airways profits have fallen by nearly 90 per cent and its boss admits the airline industry is in crisis.
The news will mean soaring fares - they are already up seven per cent this summer - as the airline seeks to avoid going into the red.
"We are in the worst trading environment the industry has ever faced," said BA chief executive Willie Walsh.
Carriers are suffering far more badly than in the airline recession that followed the 9/11 terrorist attacks of 2001 in which BA bosses admitted they were within weeks of going bust.
For April, May and June, the traditionally strong trading quarter for BA, profits plunged to £37 million from £298millionlast year, a fall of 88 per cent.
"The combination of unprecedented oil prices, economic slowdown and weaker consumer confidence has led to substantially lower first-quarter profits," said Mr Walsh. "Fuel prices have doubled in the past year. We expect our fuel bill to top £3 billion this year - the equivalent of more than £8 million a day."
The figures strongly indicate the airline could plunge into the red over the full year as it needs to make big profits in the summer to offset the traditionally poor winter trading.
BA's fuel bill will be £1 billion up on last year, more than enough to wipe out last year's record profits of £825 million. But rather than join budget-airline Ryanair in a price war to keep passengers flying, BA says it will charge its customers more.
With falling passenger numbers - its own statistics reveal its planes are on average less than three quarters full - it will also cut back its flights by six per cent this winter.
The cuts will affect long-haul, shorthaul and domestic flights. Rather than drop routes entirely, it will cut frequencies.
On its most profitable route to New York's JFK airport, there will be seven flights a day, rather than eight, there will be two rather than three to Los Angeles and just one a day to Tokyo.
The poor results, say analysts, explain BA's plans to merge with Iberia and create a £4billion airline to compete with large continental groups.
In addition to its rising fuel bill, BA's airport handling costs have risen
8.5 per cent more than expected because of the foul-up at the opening of Terminal 5 at Heathrow.
Reader views (5)
Well as all airline are suffering and trying to attract new customers with lower fares, it won't be long till either Willie Walsh get a P45 or BA bits the Dust? Simple math to boost sales you need paying customers - charge more = less Customers? I don't see the logic?
- Phil, London
Abolish first class and business class, make a bit more room for "human class" and charge for food and drinks. It's not rocket science.
People who want to be posh can buy their own planes and if they can't afford that then they aren't posh anyway so they should travel "human class" like the rest of us.
- Mikko Takala, Drumnadrochit, Scotland
However low BA profits fall, I assume that Willie Walsh will still claim his absurdly inflated bonus as before.
At last reality is returning to many aspects of business, especially airlines,housing & the travel industry in general. They have taken the public for a ride for too long, no one should feel sorry for their demise.
- Anthony John Calladine, Weston Supermare
Good! We need fewer flights, no more airports, no more runways at existing ones. Why does everyone have to be chasing round the world by air all the time? I bet they haven't even seen their own countries. Cutting back on flying is the best news for a long time. We on the ground may have a little bit of peace once more
- Judith C, London
Willie Walsh is right to charge more for what is still a premium service. Rather than try to compete with the egregiously misleading marketing tactics of O'Leary's awful cattle transports, BA should continue to concentrate on providing fine cabin service at a fair price- what it has always done best.
There's a big a slump coming in air passenger travel, and it will be the budget carriers who suffer the most; those who fly because they need to rather than because they can will always choose service over price.
- Philip Robinson, London, UK
