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British Airways has been forced to ground 22 of its biggest planes and slash seven routes as it slumped to its first peak-season loss.
The airline dropped £148 million into the red during the key April to June quarter when it would normally expect to make a thumping profit. Even last year, when the economy started to fall into recession, BA was £37 million in the black in the same period.
BA, which this week axed free meals for economy passengers on European flights and culled canapés in business class, said it was still being buffeted by “very challenging” trading conditions with “no visible signs of improvement”.
Chief executive Willie Walsh said bookings are slightly higher over the summer but that tickets were being sold at lower prices, wiping out the benefit.
He 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.”
The carrier will ground 22 of its long-haul aircraft — Boeing 747s and 757s — by next winter, taking about 8,000 seats out of service. Overall capacity is being cut by 3.5 per cent. The airline has also axed seven routes from Gatwick: JFK New York, Alicante, Barcelona, Krakow, Madrid, Malta and Palma.
The company has never made a loss in the first or second quarters of its financial year since it was privatised in 1987. Over the whole year revenues are likely to be down £1 billion on last year, warned finance director Keith Williams.
In a clear warning to staff, Mr Walsh said: “Our work to reduce costs, which started last October, is beginning to bear fruit as they are down 6.6 per cent. But with revenue still weak, there is much more to be done.”
Mr Walsh has said the company faces a fight for survival without deep job cuts and changes to working practices. The airline has already reduced its payroll by 1,450 since March through “reduced overtime, increased part time working and targeted voluntary redundancy”, he said.
“The airline is confident of achieving previously indicated targeted reductions by March 2010. Our engineers and pilots have voted for permanent change. This is a great step forward. Talks with other union groups continue,” he said. “We're cutting forecast capital expenditure by 20 per cent this year, from £725 million to £580 million, and it's likely to remain at the same level next year. “
The airline said about 7,000 staff have signed up to voluntary schemes to save money, including about 800 who have agreed to work for nothing for a month.
Manoj Ladwa, senior trader at brokers ETX Capital, said: “The numbers from British Airways, whichever way you slice them, make grim reading. They are pulling out all stops in order to remain viable as a business, but an uncertain economic outlook, a pension deficit and delayed merger talks are factors that are going to weigh on the company for the foreseeable future.”
Passenger traffic fell 3.8 per cent in the quarter, led by a slump in first and business class travel. Revenues fell more than 12 per cent from £2.26 billion to £1.983 billion.
Airlines around the world may lose $9 billion this year and sales may drop 15 per cent, according to the International Air Transport Association, a forecast that Mr Walsh has called “optimistic”. BA made a record £401 million loss last year.
Reader views (32)
In their defence it's not the staff at BA that are the problem -it's the company. The culture at BA is to get your money then not give a fig about service so the poor staff face the brunt of anger from passengers as they are not allowed by company policy to treat them fairly. I personally never fly BA unless I have to- but Ryanair & Easyjet are much worse and actually quite often more expensive. Walsh turned Aer Lingus into a rubbish low cost no frills carrier and he appears to have the same plans for BA. Maybe they should put more effort into those at the back of the plane as those at the front just aren't there any longer. First steps would be to ditch the Irish CEO
- Pete, London, 15/08/2009 01:05
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If the major international airports in the UK are anything like that of the Netherlands (Schiphol), then I'm not at all surprised that fewer people are flying. The increase in airport taxes has hit families the most. If I want to fly from Amsterdam to New York, the tax is almost equal to the bare ticket price, between €300. to €400.00! If the UK had a good government, they would do something about the high taxes to encourage more people to fly. Most likely BA will soon get a large hand-out from The Bank of Gordon Brown to keep it going. That money will probably come from the pot of "High Airport Taxes" that were in the first place unfairly milked from passengers. This BA loss could have been prevented by the government, had the government acted earlier this year by decreasing the unfair taxes on passengers.
- Stevie, Haarlem Netherlands, 03/08/2009 12:35
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Businesses have folded and cutting back on their expenditure hasn't helped BA at all. A lot of the staff are arrogant and rude staff which adds to their demise. You do have helpful staff but one rotten apple spoils the barrel. They aren't my first choice airline any more. Their bubble has burst!!
- Leon, London, 02/08/2009 17:18
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Well, here is why at least two people have vowed never to travel with BA again. My friend paid 258 euros for the privilege of flying ONE WAY with BA from Gatwick to Heraklion. It was a BA-franchised flight operated by GB Airways but governed by the policy of BA and the ticket was issued by BA. On check in, she was charged £60 for carrying 2 pieces of luggage instead of one even though the total weight of both DID NOT EXCEED THE WEIGHT ALLOWED, and was also forced to fork out another £15 in order to buy a backpack that complied with their regulations and re-pack into it her own carry-on bag. She was frantic with stress when she phoned from the airport to tell me. Maybe they needed to resort to these ridiculous measures to make up for their own incompetent shortcomings in baggage handling, but even charter airlines do not resort to tricks like this, and they are much cheaper. I wrote to them explaining the situation and asking for a refund. After 8 months, numerous e-mails, being passed from GB Airways to BA customer relations, having to explain the situation every time, and actually being given the impression that a refund would be issued, they finally decided that no such thing would happen and that was the only straight answer I got from them.
I feel desperately sorry for the people who work for them who are now being made scapegoats by losing their jobs. It is the cynical, greedy fatcats at the top who make the decisions that should also bear the consequences.
- Stellam, Northamptonshire, 02/08/2009 11:45
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No one would use BA economy long haul would they? Cathay, Singapore, Emirates are way above BA for service and price. In recent years I have assumed that BA was trying to push unwanted economy passengers onto other airline as a business strategy.
- Bob H, Brisbane, 02/08/2009 11:36
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Walsh has to go
- Edwin, beaconsfield buckinghamshire, 31/07/2009 22:14
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I think people here miss the point.Heathrow as a hub causes most problems on the ground for BA,its a massive place,try travelling frequently to other destinations around the world before moaning about T5.Its a god send,and OK sometimes a spanner is dropped in the works but mainly thats the BAA's fault and they work with BA to rectify.All airlines are suffering ,do you think Air France/KLM posting 600 million losses this morning means they won't make cuts too?
BA have to make draconian cuts left right and centre or they will not exist.Anyone who whinges that low cost carriers are better does not travel very much,when that goes wrong it goes badly wrong.And the idiot who says BMI are cheaper by 40 quid?,so what the following day BA might be cheaper by 25 quid,it works both ways.BA have no one to bail them out like many airlines and Gordon Brown taxes them and us much more than other countries.They are doing incredibly well considering,40000 jobs are at stake,I for one think if BA goes down because of stubborn unions etc then everyone will realise that BA 's safe and secure aeroplanes are sadly missed with great staff.
- Stuart S, Woking, 31/07/2009 17:33
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Last year I flew Singapore Airlines return to Sydney on their new Jumbo aircraft in economy class. Although it was £50 dearer than BA it was well worth it for the excellent food, seat comfortability and flight attendant's ambience compared to BA.
Maybe BA should concentrate more on it's economy class passengers.
- Tom Feely, London, England, 31/07/2009 16:43
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BA are still doing everything in their power to drive customers away with their attitude. i fly some 8 to 10 times a year and 3 weeks ago at heathrow with my wife we had 2 suitcases . on their scales one was approx. 18 kilos and the other half a kilo over their 23 kilo limit. they insisted i caused a huge hold up [how dare call it fast drop off when there is always a long queue}by having to open both cases and transferring the half kilo over. how ridiculous. add to this my free snack has been taken away from me after i have booked my next flight on the assumption i was going to be treated a little better than the budget airlines and to top it all yesterday i received an email informing me flights i have booked and paid for for next january and march have been cancelled and they have transferred me to other flights without even asking me if that is convenient. the sheer arrogance of everything they do. i know who i will not be flying with in future.
- Isaac.B London, london uk, 31/07/2009 15:54
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I really do not understand people running down BA, my husband and I travel to Lisbon at least once a year on a scheduled flight from Heathrow. We also travel regularly each year on charter flights from Gatwick and dread them. you get hearded like cattle at Gatwick. BA are great the cabin crew are always very helpful and polite I can;'t wait to go again in September. BA are by no means expensive and at least you are treated well not like cheap cut price airlines.
- Janet, hampton, 31/07/2009 15:48
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I have written once already to tell people of our terrible experience at Heathrow - the person concerned would not allow us to fill in a Visa Waiver form - he also was extremely rude, told us to go away and not like any other BA staff that we have met in our travels - when we wrote to the legal deparment of BA - bascially we were told that BA were absolutely correct and when we asked for our return ticket money back as they refused to fly us, we were told NO - we tried to have it removed from our personal CC again - only to be told by the card company - that BA had said that they would not accept this so therefore not only did they keep the money for our return flight but also kept the air miles that we had used.We were told that we were on a no fly list - my husband is 72!!!!!! I was told by BA that no airline would fly us back to Dallas. When I telephoned AA straight after - we were booked on a flight back the very next day.
We had a great deal of expense staying at a hotel and having to pay for a rental car, new AA tickets as well - we wrote to BA enclosing all copies of our expenses - only to be greeted by a curt letter saying that they were right and that was an end to it.....even our attorney tried - but was ignored...exasperated as we both still are I certainly do not have any anger to the flight staff that we have been been in contact with and have always found them most helpful.
Maybe if they trained their ground staff it might help to get more passengers to fly BA
- Elizabeth Taylor, dallas TX, 31/07/2009 15:42
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Earlier this month, I travelled to Athens and back on BA. Great web-site: booking online is dead easy, check in, seat reservation also on line is first class, even when you're travelling economy. My first experience at Heathrow T5 was a joy compared with T1. The return trip was less perfect, due to delays and no buses to unload us when we arrived back at Heathrow. As for the check-in staff and cabin crew, without exception, they were first class too. Time to support our national airline and all the ladies and gents and boys and girls at BA that work hard in a difficult climate.
- Michael H, London, England, 31/07/2009 15:34
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With BA - WYSIWYG - no hidden charging or fees for booking on line, at extremely reasonable prices. The only people who like the cheapo outfits like Ryanair are people with holiday homes abroad or those who don't mind being dumped 40 miles away from where they actually want to go to. I won't fly with anyone else if I can help it (and it's not their fault British airports are holes, either).
- Blue Baby, London, 31/07/2009 15:29
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BA's LOWER prices part of the problem? I do think not. I just (in July) paid an arm and a leg for a Miami-London return. While the service was pretty good, I couldn't shake the feeling that I had a gun in my back.
- Gail Renard, Florida, USA, 31/07/2009 15:17
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I flew to Brazil by Air France wonderful service,polite staff nice food,and cheaper fares.Take note BA.
- Edward, london, 31/07/2009 15:13
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With the management skills of Mr Walsh (where did he get that hair style from?), in a few years BA will be just one pilot and a Tiger Moth. He just doesn't get it-the days of lavish business-class 747's filled with high spending jet-setters have gone; temporarily or more likely permanently. Regrettable?-yes-but the world has changed and it is slowly penetrating even bone-heads that mass aviation has to be curbed in the interests of global climate change.
- Jon Kent, Hertford. UK, 31/07/2009 14:54
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Flying anywhere in the world has ceased to be a pleasurable experience since 9/11,the cost of massively increased security checks and restrictions on certain types of luggage,virtually stripped searched,all this after you have already been ripped off financially with the ticket price,lets face it airlines such as Ryanair,Easyjet and BA are nothing more than cattle trucks with wings,there's just no pleasure from the time you arrive at the airport until you leave departures at the other end,but mainly its the price that puts people off.
- Jacob, Canterbury England, 31/07/2009 14:24
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BA selling tickets at lower prices?
I think not.
Example:
BA from Heathrow to Moscow Domdedovo = £276
BMI from Heathrow to Moscow Domodedovo = £235
Same airports, same times, same days.
What's the extra £41 for Mr. Walsh?
I've used both services and I prefer BA but in cost conscious times BMI get my cash.
A business model built on business class services, which is how BA operate, is doomed in times like these when companies are drastically reducing their travel budgets. BA have to compete on price in the economy sector or they will fail.
Willie Walsh seems to be the only one who doesn't understand this.
No wonder BA are in trouble.
- Malcolm, London, 31/07/2009 14:15
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For the ordinary passenger flying economy class, the whole process of travelling by air, irrespective of airline, has become an intolerable nightmare. What used to be an enjoyable and interesting part of a holiday is now humiliating and time consuming. Perhaps if a modicum of common sense was reapplied to airport security the missing passengers might be tempted back to air travel. In the meantime I'll stick to the Channel Tunnel and my car, or else rent a nice chalet or cottage in this country.
- Scotty, Cambridge UK, 31/07/2009 13:44
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The management at BA are useless and have been for many years, even before Mr Walsh.
Get the message out that you dont charge for credit card bookings,to use the toilet, to bring a bag, for a cup of coffee and people will come, oh and reduce your prices a bit too.
- Mr S.Port, London, 31/07/2009 13:17
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I do not know much about budget airlines. But I do fly weekly with a lots of airlines like BA, Swiss, KLM, Virgin Airlines, BMI, Lufthansa, Emirates and EXCEPT British Airways they have all become so much better. BA stands out by cutting corners and low service levels. Luggage gets lost, onboard service is surly or non-existing, food is bad, you arrive late at bad airports like Heathrow or Gatwich etc. etc. and many times they are so much more expensive for unfriendly service so I have given up on BA... My colleagues have complained in fact so much about their staff recently but it does not change. I think BA has lost the plot. Shame.
- Georgie, Islington, London, 31/07/2009 13:15
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Peter, Sao Paulo: But TAP is the national Portuguese airline (and hence flies regularly to Brazil), as BA was once the national airline of this country and still flies to most of our former colonies. (And TAP were an hour late - would that have passed without criticism coming from BA?). Most "national" airlines are better than "low cost" ones and give as good as if not better deals, as long as you book sufficiently in advance - and they take you where you want to be. Plenty for BA to improve on in terms of how they run their business and I totally agree with comments about management greed, but can't help thinking that much criticism is just more Brit-bashing - often from people who don't even use BA.
- Pam, East Kent UK, 31/07/2009 13:00
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I'm a very frequent traveller. I always add the cost of getting to and from airports to the cost of the ticket. In most cases budget airlines end up costing the same as traditional airlines, and in most cases if adding a luggage surcharge, budget airlines cost even more than traditional airlines.
- Gavin, London, 31/07/2009 12:56
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There goes another British emblem on Crash Gordon's list of companies to destroy (aka the great scottish revenge)
- Marianne, SW France/London, 31/07/2009 12:17
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Couldn't happen to a better airline. I yesterday returned to Brazil from a trip to Europe on TAP Air Portugal. Totally full and exceller service albeit one hour late in order to fix a business class seat. I regularly fly Lufthansa long hall and find them also excellent.
- Peter Glazier, Sao Paulo, Brazil, 31/07/2009 11:41
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Megan,
in fact it can the opposite. If you fly from Heathrow the round trip on BA comes to about 90 pounds, on KLM it is over 130 pounds. I have always found BA prices very competitive and will agree with Pam/East Kent, once you add all the surcharges and travel to and from the airport that is not even remotely close to the city you want to fly to, you will see that so called Budget Airlines don't fare much cheaper.
- Carsten, London, 31/07/2009 11:35
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Can't help but think that all the outsourcing and offshoring has been a significant contribution to the poor performance - shows that the company couldn't care less about its employees, so why should they care less about BA.
- Andy Davids, London, 31/07/2009 11:33
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How many millions have been paid to top management as bonuses over the years.Had this money been put aside for tough times,as was the case thirty years ago,the company would not be in any difficulty.Its all due to the greed of executives who believe that besides their hugh salaries,they are entitled to huge bonuses,and this thinking applies to all companies nowadays.
- Dave, london, 31/07/2009 11:33
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But are they (other airlines) really low-cost? Have just tried to book a return flight to Turin with Ryanair for someone else and after all the hidden add-ons (including having to pay for each and every piece of non-hand luggage, not to mention the £40 check-in fee at the airport if you are not able to check-in online), a flight advertised at £15 ends up costing only a few pounds less than BA. I am not a frequent flyer but have never had a bad experience with BA (whether long- or short-haul), and as a nervous passenger I'd far rather be in the hands of the highly trained and reassuring BA crews than any other.
- Pam, East Kent UK, 31/07/2009 11:07
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Tickets being sold at lower prices? Just google a trip from Heathrow to Amsterdam and you will find that KLM is nearly half the price of a BA Flight on the same route. The food served on BA Economy European flights is inedible anyway, so no loss there.
- Megan, Amsterdam, Netherlands, 31/07/2009 10:33
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How can a company with a monopoly on schedule slots get it so terribly wrong? Walsh needs to go.
- Frank, Home Counties, England., 31/07/2009 09:30
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BA need to change their business model before it's too late. They cannot survive against the backdrop of low cost airlines. There is no value added service at BA. Service is poor, fairs are higher & you can get better all round service and prices from low cost airlines. Big companies are telling their employees to fly low cost airlines.
- Frank, Copenhagen, Denmark, 31/07/2009 07:53
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