Massive debts and recession point to tough times ahead

Published on Friday 22 May 2009 23:38

ONLY a year ago British Airways was reporting a record profit of £922 million, but the global recession has brought hard times to the UK's largest airline.

Business and club class seats are lying empty, while increases in the price of oil have sent its overheads soaring.

BA has also been challenged by the rise of the budget airlines, such as EasyJet and Ryanair. Cheaper flights are now increasingly being sold to business travellers as a way of cutting costs, and BA is currently offering discounts and special deals to business customers which will further damage the most profitable area of its business.

The company is also flying with a massive debt burden – it is currently 2.4m in debt, with a pension deficit of 1.2 billion.

Some analysts say the flag carrier's reputation was also badly damaged by the delays and other problems caused by the opening of Terminal Five at the beginning of last year.

Flights were cancelled and thousands of bags went missing in what a House of Commons committee later said was "a national embarrassment".

BA has been a vocal supporter of a third runway at the airport, but the plan has been criticised by green campaigners who say it will lead to increased global warming and by local residents who say it will damage communities.

Although the price of oil has now fallen and the airline has made savings by cutting staff numbers, the global downturn combined with the weakness of the pound make it likely more hard times lie ahead.