Shares in BA rise on back of investor confidence

Published on Friday 6 November 2009 21:19

SHARES in British Airways jumped 7 per cent yesterday as the airline signalled that business was stabilising, eclipsing predictions of another £400 million-plus in annual losses.

Investors took solace in news that revenue from potentially-lucrative business travellers was back at pre-credit crunch levels, by one industry measure.

BA, whose alliance with American Airlines and Spain's Iberia is being scrutinised by European and US competition watchdogs, yesterday reported a pre-tax loss for the six months to the end of September of 292m.

It is the first time that the carrier has recorded a deficit in the first half – normally a buoyant period for the airline as it includes the holiday season.

There was also gloomy news on the jobs front with the announcement that an extra 1,200 jobs are to go, taking the total reduction at BA to 4,900 by next year.

Analysts, though, remained generally upbeat on the airline.

Nick Cunningham of brokerage Evolution said: "The market was fearing something worse but BA's tone was more optimistic than it has been – it can see light at the end of the tunnel now."

The airline reported better traffic data, with all-important premium, or business class, traffic down just 1.4 per cent in October, year-on-year, a vast improvement on September's 7.9 per cent slump.

It also said premium yields – the revenue it makes on each business class passenger for every mile travelled – had returned to pre-credit crisis levels over the last three months.

Revenues fell 13.7 per cent to 4.1 billion and chief executive Willie Walsh warned of a 1bn decline across the full year.

"We're determined to reduce costs further to ensure we return to acceptable levels of profitability," he said.

No shareholder dividend will be paid for the period ended 30 September.

Bank of America Merrill Lynch estimates BA made a 144m loss for the second quarter – normally one of its best quarters – and analysts expect it will suffer an even larger full-year loss than last year's record 401m shortfall. One poll of analysts put that shortfall as high as about 580m.

The carrier is still in talks with unions over staffing problems and reiterated plans to impose new contracts on crews.

Meanwhile, Walsh said he was "confident in the strength" of BA's case to win US department of transportation approval for a sales tie-up with American Airlines and Iberia.

Shares in BA closed 12.5p, or 6.7 per cent, higher at 198.8p.