Friday 28 July 2017

BA has nine-month loss on travel slump

Steve Rothwell

British Airways has said its nine-month loss widened as the slump in demand for air travel persisted in the wake of the global recession.

The company had a loss of £245m (€280m) in the period though December 31, compared with a loss of £127m a year earlier, it said today in a statement. Sales fell almost 13pc to £6.14bn, though the revenue slide eased to 11pc in the fiscal third quarter.

The carrier reported operating profit of £25m in the third quarter, the first positive result by that measure in five quarters.

BA has slashed capacity and pushed back aircraft deliveries as it seeks to preserve cash. The company is confronting its first strike since 1997 after failing to resolve a dispute with cabin crew over working terms.

“We still expect to make record losses this year,” Chief Executive Officer Willie Walsh said in the statement. “Permanent structural change is being introduced in all areas and will return us to sustained profitability.”

BA said earnings improved in the fiscal third quarter compared with the same period last year and that the airline will have “similar” improvement in the fourth quarter, excluding “any impact of potential industrial action.”

Expense reduction

The airline reduced its total costs by more than 10pc in the nine-month period, with reductions gathering pace to 14pc in the fiscal third quarter, BA said in a presentation prepared for analysts. Employee costs declined 10.2pc in the quarter and the fuel bill plunged 22pc.

British Airways has advanced 66pc in 12 months in London trading. Air France-KLM Group rose 56pc in that period, and Deutsche Lufthansa AG gained 17pc.

The Unite union, which represents cabin crew, has asked a London judge to block BA’s decision to reduce the number of flight attendants on long-haul flights because changes in working terms were imposed “unilaterally.”

The group is also balloting members on strike action after a vote on a 12-day walkout was voided by a UK judge because it included workers who had already agreed to leave the company.

The airline is conducting informal talks aimed at averting a strike, the Unite union said yesterday. The two sides are “not miles apart,” the group said.

Iberia merger

British Airways said February 1 it’s presenting proposals to employees to address a £3.7bn pension deficit and enable a merger with Iberia Lineas Aereas de Espana SA.

The merger with Iberia is subject to resolution of discussions between BA and pension trustees. The airline has a June 30 regulatory deadline to come to a pension agreement.

BA is also seeking approval for a trans-Atlantic alliance with AMR Corp.’s American Airlines.

BA and American, the two leading carriers in the Oneworld alliance, have asked for permission from US and European regulators to create a joint venture for services across the north Atlantic, for the third time since 1996.

The last attempt foundered in 2002 after US regulators indicated they’d require the surrender of some London Heathrow airport flights to competitors.

The carriers are seeking clearance to cooperate on flights between the US, Mexico and Canada, the EU, Switzerland and Norway.

Global airline losses will amount to €5.6bn this year, according to International Air Traffic Association forecasts, after a deficit of about $11bn in 2009.

Passenger traffic fell the most ever last year and a recovery in demand in recent months has yet to translate into higher fares.

Bloomberg

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