| British Airways Sees Record Losses This Year |
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05/02/2010 13:45 (736 Day 08:53 minutes ago) | ||||
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The FINANCIAL -- British Airways said Friday that net losses in the nine months to December nearly doubled to 245 million pounds, as the slump in demand for air travel persisted in the wake of the global recession. The airline confirmed that it is on track for a record full-year loss.
The company had a loss of 245 million pounds ($385 million), or 22.4 pence a share, in the period though Dec. 31, compared with a loss of 127 million pounds, or 12 pence a share, a year earlier, it said on February 5 in a statement, according to Bloomberg. Sales fell almost 13 percent to 6.14 billion pounds, though the revenue slide eased to 11 percent in the fiscal third quarter.
The carrier reported operating profit of 25 million pounds in the third quarter, the first positive result by that measure in five quarters, the same source reports. British Airways, Europe’s third-biggest carrier, has slashed capacity and pushed back aircraft deliveries as it seeks to preserve cash. BA 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.”
Further, the company said its proposed merger with Iberia, which is expected to generate annual synergies of EUR 400 million, is likely to be completed in late 2010, RTT News reports. Looking ahead, the carrier said the trading improvement seen in the third quarter is expected to be similar in the fourth quarter. While longhaul premium continues to show modest improvement, other segments continue to be stable at current levels, it added.
BA is currently locked in a High Court battle with the union Unite over changes to cabin crew contracts and is facing possible strike action, according to BBC. Analysts had predicted BA would announce a loss of £151m in the third quarter, taking its loss for the nine months to £443m.
British Airways shares opened up 2.2% at 216p before falling to 212p in early trading, the same source reports. Howard Wheeldon, of BGC Partners, said there are still "manifold problems" for British Airways. "Despite these figures being better-than-expected, the situation for BA that does remain very serious is its industrial relations problems," he said.
The airline reduced its total costs by more than 10 percent in the nine-month period, with reductions gathering pace to 14 percent in the fiscal third quarter, BA said in a presentation prepared for analysts, Bloomberg reports. Employee costs declined 10.2 percent in the quarter and the fuel bill plunged 22 percent. British Airways has advanced 66 percent in 12 months in London trading. Air France-KLM Group, Europe’s largest carrier, rose 56 percent in that period, and Deutsche Lufthansa AG , the continent’s No. 2, gained 17 percent.
BA also announced that it is reopening talks with staff about cutting its £3.7bn pension deficit, including the options of reducing accrual rates or increased contributions, Guardian informs. The discussions follow a deal three years ago that saw BA make a cash payment of £800m into its pensions schemes, whose combined deficit was then £2.1bn. The funding hole has deepened since and could endanger the airline's proposed tie-up with Iberia, Spain's national carrier.
A BA spokesman said: "We believe that if we work together with our staff and unions to tackle the deficit and revise future benefits, it may be possible to avoid closing our final salary schemes, according to the same source. Our initial discussions will identify a range of possible future benefit changes, focusing on reduced accrual rates or increased member contributions. At this stage, nothing has been ruled in or out."
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