BA dives as Branson says it's 'not worth much any more'

Published on Monday 22 June 2009 21:10

BRITISH Airways was forced to deny it was seeking assistance from the government yesterday as speculation over its future mounted.

The airline was the biggest faller in the FTSE 100, hit by fears over its pension deficit and comments by Sir Richard Branson, the founder of Virgin Atlantic, that BA was "not worth much any more".

Branson urged the government to resist the temptation to bail out BA, whose chief executive Willie Walsh recently claimed the airline was "fighting for survival".

But yesterday BA dismissed suggestions that it might be seeking government support.

A spokeswoman said: "BA is not in talks with the government and there won't be any talks. We are opposed to state support and our position on that has not changed."

But, despite the reassurances, the shares still tumbled, closing down 11.8p or 8.6 per cent at 124.6p, valuing the company at less than 1.5 billion.

The airline has been hit by a string of problems, most notably its pension deficit, which could be as much as 3bn.

In the year to 31 March, it slumped to a pre-tax loss of 401 million, the worst since it was privatised in 1987, prompting Walsh and finance chief Keith Williams to offer to work for free for a month and ask other staff to follow their example.

While all airlines have suffered in the recession and rising fuel costs, BA has been hit especially hard by a loss of business class customers, as travel companies' budgets are slashed.

Howard Wheeldon of BGC Partners said that while he believed BA should survive, it had to adjust to a slimmed down operation because the boom of recent years may not return.

"Many of those missing (business class] passengers may never return – not because BA has lost their trust, but because in a technology driven cost-conscious age the days when companies can afford to send staff jetting all over the world at premium prices have ended," he said. Despite the problems, BA yesterday launched a new business class-only service between London's City airport and New York JFK.

"In the harshest trading environment airlines have experienced, we believe it is more important than ever to embrace the future and innovate. That is what this historic new route is all about," Walsh said.

Meanwhile, Lufthansa will take control of BMI British Midland next month after agreeing to pay Sir Michael Bishop 223m for his majority stake in the UK carrier.

The deal, which sees Lufthansa increase its stake from 30 to 80 per cent, follows an out of court settlement, after Bishop took the German airline to court to enforce an agreement that would have forced it to buy his stake for up to 400m.