Friday February 6, 12:40 PM
British Airways sinks into red, signals cost-cutting
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LONDON (AFP) - British Airways (LSE: BAY.L - news) on Friday reported a net loss in the first nine months of its 2008-2009 financial year due to the weak pound and the global economic crisis and signalled it would slash costs.
BA said it suffered a net loss of 127 million pounds (186 million dollars, 146 million euros) in the nine months to December 31, 2008, compared with profit of 642 million pounds in the same period of the previous fiscal year.
"These results have been hit by further economic weakness and the fall in sterling," said chief executive Willie Walsh in a results statement, which also revealed that sales rose 6.2 percent to 7.05 billion pounds.
The company added that it was consulting with trade unions about efficiency measures after group costs ballooned by more than 1.0 billion pounds to reach 7.0 billion pounds in the reporting period.
BA's fuel bill surged almost 50 percent to 2.244 billion pounds, despite slumping crude oil prices, reflecting the collapse of sterling against the US dollar. Jet fuel, or kerosene, is refined from crude and measured in dollars.
"The current weak economic environment drives a need for significant cost reduction, as revenue growth will be difficult," BA added.
"In the period we completed a management restructuring and associated voluntary severance programme.
"We have opened discussions with the trade unions about pay and productivity, which is required to improve the financial performance of the company."
British Airways also stated that operating profits tumbled by 88 percent to 89 million pounds in the nine-month period, which compared with 744 million pounds last time around.
BA had already prepared investors for bad news last month when the group warned that it expected to make an annual operating loss of 150 million pounds in the current fiscal year which runs until March 2009.
In the London stock market on Friday, BA shares rose 2.66 percent to 131 pence in late morning trade on London's FTSE 100 index of leading shares, which was down 0.89 percent at 4,266.55 points.
"Having already warned of a likely full year operating loss a few weeks ago no one should have been that surprised at the loss for the first nine months of the current year," said Howard Wheeldon, senior strategist at BGC Partners.
The airline said in a separate statement that passenger traffic fell 1.3 percent in January 2009 compared with the same month last year, as the carrier took a hit from the dramatic economic slowdown in Britain.
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