British Airways narrows loss
British Airways PLC reported a narrower loss for the fourth quarter despite the combined effects of a slowing U.S. economy, foot-and-mouth disease and malfunctioning computers.
The world’s fourth-biggest airline posted a profit for the full year today, and its annual operating earnings beat most analysts’ forecasts despite higher fuel prices.
The results are the clearest sign yet of a turnaround in the fortunes of Britain’s unofficial flagship airline and a vindication of chief executive Rod Eddington’s efforts to slash costs and restore profits.
The airline lost £77 million ($110 million) for the three months ended March 31, versus a loss of £168 million ($240 million) a year earlier. Its operating loss fell to £61 million ($87 million) from £125 million ($178 million) a year earlier.
Revenue for the quarter, typically BA’s weakest, was unchanged at £2.12 billion ($3 billion). Revenue from scheduled cargo operations dipped 0.7% in the quarter to £133 million ($190 million).
Company earnings suffered in March when computers that control BA’s ticket bookings malfunctioned for about 10 days. The outbreak in Britain of foot-and-mouth disease also dented fourth-quarter sales, as did the abrupt slowdown in the U.S. economy. Together, these problems accounted for at least £15 million ($21 million) of the quarterly loss, the airline said.
Its annual profit was £114 million ($163 million) compared with a loss of £21 million ($30 million) a year earlier. Revenue for the year was flat at £9 billion ($13 billion). But cargo revenue increased 4.1% to £579 million ($827 million).
Operating profit for the year was £380 million ($542 million), slightly ahead of most analysts’ forecasts and far better than the previous year’s operating profit of £84 million ($120 million).
“This is an encouraging set of figures showing that our business strategy is delivering results,” Eddington said.
The earnings turnaround for the year came despite a 37% rise in fuel prices to £1.1 billion ($1.6 billion).
BA, which ranks fourth in the world in terms of airline passenger traffic, decreased its fleet size during the year by 28 planes to 338 aircraft. Eddington said it had made ”some useful savings across the business,” including cuts in the costs of finance and catering and in numbers of staff.
BA would continue to reduce its work force through ”natural attrition and voluntary redundancies,” he added, although he refused to say by how much. BA cut its staff to 58,000 last year from 61,000.
Eddington said he was confident of selling Go, British Airways’ low-fare subsidiary, to 3i Group PLC, but said there were other possible buyers.
”I’ll sell it when I get the price I want, and I’m confident I’ll get that,” he told reporters in a conference call.
Eddington said also that he expected BA’s supersonic Concorde to return to the skies by late summer. Concorde was grounded after an Air France Concorde crashed in Paris in July, killing more than 100 people.
Eddington took over at BA last May, following the company’s worst year since privatization. Competition, particularly on its core trans-Atlantic routes, had intensified.
Former Chief Executive Bob Ayling had resigned in March after four turbulent years at the helm. Talks on a long-planned merger with KLM Royal Dutch Airlines collapsed in September.
