Financial News

LONDON (ShareCast) - British Airways (LSE: BAY.L - news) carried 3.8% fewer passengers in June but said it will cut spending by 20% to deal with the challenging market conditions.

Traffic, measured in Revenue Passenger Kilometres, fell by 3.8% in June. Passenger capacity, measured in Available Seat Kilometres, was 1.7% below June 2008.

The load factor, a measure of how well BA fills planes, was down 1.8% at 79.6%, while cargo traffic was down nearly 10%

The group said market conditions remain "very challenging" with trading at levels well below last year. But on an underlying basis, both premium and non-premium volumes and seat factors have been stable for more than three months, it said.

Forecast capital expenditure has been reduced from £725m to £580m for 2009/10 and is likely to remain at that level in 2010/11. "As previously indicated, Manpower Equivalents (MPE) are targeted to be reduced by some 3,700 in 2009/10 - this is in addition to the reduction of around 2,500 achieved between June 2008 and March 2009," it said.

To deal with the challenging conditions it has also reviewed its business plan. Capacity for the current summer period is now expected to be down 3.5% (previously 2.5%), with capacity in the winter down 5% (previously 4%).

The remaining three mainline Boeing (NYSE: BA - news) 757 aircraft will be grounded in summer 2010 and a further three Boeing 747-400s in winter 2010, it said.

The group said it will also delay the delivery schedule of new aircraft.

"Some 7,000 British Airways employees have volunteered for schemes in support of the airline's cost reduction programme. Their actions will save the company up to £10 million," it added.