BA profits plunge

November 7, 2008
Shares

, LONDON, November 7 – British Airways announced a 91.6 percent plunge in half-year profits on Friday amid "incredibly difficult trading conditions" and high fuel prices.

Pre-tax profits dived to 52 million pounds (64 million euros, 82 million dollars) from 616 million pounds during the same six-month period a year earlier.

Despite the profits fall, BA shares surged 16.2 percent to 151.6 pence in London trading at 1115 GMT because the results were better than analysts\’ expectations.

The airline recorded a net loss of 42 million pounds for the six months to the end of September and said passenger numbers were down by almost four percent.

BA chief executive Willie Walsh said: "This is a good performance given the incredibly difficult trading conditions. The six-month period will be remembered as the bleakest on record.

"The period was hit by a crisis in the banking sector, record fuel prices and several airlines going out of business."

BA said it was confident it would make a "small profit" for its 2008-09 financial year even though fuel costs were expected to total about three billion pounds, a rise of more than 50 percent.

The airline said that although oil prices had decreased sharply in recent weeks it would not see the benefit because of the fall in the pound against the dollar and because it had bought in fuel while oil prices were still high.

Revenues for the six months to September 30 were up 6.4 percent, despite a decrease in long-haul premium traffic since the summer, the airline said.

Operating profits, which exclude interest payments and taxation, fell to 140 million pounds from 567 million pounds a year earlier.

BA said it would slim down the number of flights it operates by about one percent next year in anticipation of reduced demand from travellers — passenger numbers for October alone were down 5.6 percent.

Among the four services it will suspend are routes from London\’s Heathrow airport to Dhaka and Kolkata.

The airline was also hit during its first half by the chaotic opening of the new Terminal Five at Heathrow, but Walsh said the terminal was now running smoothly.

"Terminal 5 is performing extremely well," he said, adding it was "proving to be the genuine asset that we always expected it to be".

Analysts gave BA credit for its performance and noted that all airlines were suffering, with low-cost rival Ryanair also reporting a sharp fall in profits this week.

Howard Wheeldon of BGC brokers said: "BA is managing the appalling market situation very well. Essentially the airline is battening down the hatches and belatedly cutting capacity on the back of a huge rise in headline costs."

Andrew Fitchie of investment bank Collins Stewart said although the outlook for airlines was poor, "BA\’s strategy appears to be working".

Shares

Latest Articles

Stock Market

Most Viewed