Profits at British Airways take off for first time in two years
Published 30/10/2010 | 05:00
British Airways has reported a pre-tax profit of £158m (€182m) for the first six months of the year, marking the first time in more than two years that the airline has made it into the black.
The profit compared to a loss of £292m in the corresponding period a year earlier, while total revenue at the group was 8.5pc or £345m higher at £4.4bn. Passenger revenue accounted for almost £3.9bn of the total revenue, having climbed 7.9pc year-on-year. Cargo revenue was up 39.4pc at £350m.
Chief executive Willie Walsh said the improved passenger revenues were primarily a result of improved yields, as the airline took advantage of reduced industry capacity in order to squeeze more from its customers. Overall costs were 1.5pc lower. And while fuel costs have risen, Mr Walsh said the move was in line with expectations. In the second quarter, to the end of September, the airline posted net income of £229m compared to a loss of £111m in second quarter of last year. Sales for the three-month period were up 18pc at £2.5bn.
"This is a cyclical recovery par excellence, driven by a phenomenal growth in yields," said Douglas McNeill, an analyst at Charles Stanley in London.
"The question now is how long that can be sustained. Capacity is going to grow and that will limit further price improvements."
Mr McNeill said he has a 'sell' rating on the stock because of its gains, the biggest in the eight-company Bloomberg EMEA Airlines Index after Spain's Iberia, with which British Airways is merging. Iberia yesterday posted quarterly net income of €74m versus a €16m loss in 2009.
Air France-KLM and Lufthansa, Europe's biggest carriers, both raised earnings forecasts this week as airlines across the region benefit from the pick-up in travel. Lufthansa reported a 17-fold increase in nine-month net income to €524m.
British Airways didn't comment on its earnings target of breaking even on a pre-tax basis this fiscal year, and said that "while positive, the economic environment continues to be subject to uncertainty," and that it remains focused on costs. (Additional reporting by Bloomberg).