BA is charting a course back to profit says Walsh

Published on Friday 30 July 2010 15:37

BRITISH Airways is on course to move back into the black this year despite the disruption caused by cabin crew strikes and volcanic ash contributing to a loss of £164 million in the first quarter.

•Willie Walsh expects BA to return to profit this year. Picture: Getty

The embattled carrier admitted the bitter industrial dispute with the Unite union and the closure of most of European airspace for almost a week in April cost it some 250m in the three months to 30 June.

But chief executive Willie Walsh said the airline had seen an improved operating performance despite the disruptions and with continued progress on cost-cutting BA still expects to break even at the pre-tax level this year after two years of losses.

"Our focus must remain on cost control as we grow and continue our quest for permanent structural change across the business," Walsh said.

The impact of the disruption saw the airline's overall first-quarter revenues fall 2.3 per cent to 1.94 billion. Passenger revenues were down 3.4 per cent after an 11.2 per cent slide in capacity.

At the operating level, losses of 72m were less than half the 148m posted a year earlier.

Walsh also played down fears of a double-dip recession, saying the airline was seeing a "steady recovery" and positive underlying trends in both cargo and passenger traffic.

The group also received a boost this month when it was given US regulatory clearance for its alliance with American Airlines and Iberia on transatlantic flights, as well as agreeing a recovery plan with regulators for its pension scheme.

But BA is still facing the threat of further strikes after members of Unite rejected its last offer, raising the prospect of another ballot for industrial action.

Walsh said he believed the "final" offer rejected by Unite members earlier this month still formed the basis of a resolution to the long-running cabin crew dispute and he said he was confident of running 100 per cent of long-haul flights if there was more industrial action.

"I want to reach a resolution but we are preparing for further industrial action.

"We continue to train volunteer cabin crew and that programme is going very well. I am looking forward to hearing what the trade union has to say in light of the poor turnout in the last ballot."

Derek Simpson, joint leader of Unite, said he was sorry to see BA lose money, but again accused the carrier of imposing change on cabin crew without their agreement. He insisted that the union had come within 10m of the savings wanted by BA which he described as a "drop in the ocean" compared with yesterday's losses.

"You have to question the direction and sense of the management, particularly its chief executive who wants to impose change in a bid to put up profits, without the support of staff."

Shares in BA, which have been as low as 134p during the last year, closed up 3.6p at 219.6p.

Societe Generale analyst Jonathan Wober said improving revenues and progress on cost-cutting suggested BA shares have turned a corner into a "more positive phase".

l Virgin Atlantic made an annual pre-tax operating loss of 132m but reported that revenues and passenger numbers rose in the first few months of the current year.

Revenues in the financial year to February fell by 8.6 per cent to 2.35bn with costs due to the volcanic ash cloud put at 30m. However, Sir Richard Branson's airline reduced operating costs by 8 per cent.

The carrier said revenue for the period March-May 2010 was up 10 per cent to 513m and its planes flew 82 per cent full during the period - a 5 per cent improvement on the same period last year.

Virgin said it carried 15 per cent more passengers in its first class cabins in the latest quarter. Chief executive Steve Ridgway said: "The start of the year has been encouraging despite difficult trading conditions. Demand is picking up across the majority of our routes and forward bookings for the summer have been very positive."