Profits crash at British Airways

BA reported a pre-tax loss of £401m for 2008, the biggest since it was privatised in 1987 and its first since 2002. The year before it made £922m, but with its fuel costs rising to nearly £3bn, passenger numbers slumping, and discounts being offered by the carrier, profits were severely affected. Chief executive Willie Walsh said he saw "no signs of recovery anywhere", with "the prolonged nature of the global downturn" making it "the harshest trading environment we have ever faced".

The loss was bigger than analysts had expected and as a result the company said it would be unable to pay a dividend for the year. It also said it would not be able to release any new guidance on either the upcoming half year or full year because of the difficulty in forecasting income amid the current global downturn. However there will be some respite in the coming months, with the recent fall in oil prices giving BA a windfall of £400m this year and other cost-cutting measures boosting earnings. The company has already frozen staff pay and cut more than 2,500 jobs since last summer and management is to forgo bonuses.

The UK flag-carrier's debt almost doubled during the year, from £1.3bn to £2.4bn with the weak pound leading to higher foreign currency borrowing levels, while its cash pile slipped by a quarter to £1.4bn.

John Strickland, independent consultant, the Guardian: "BA has done some dramatic things to cut costs already such as big job reductions and changes to flying patterns but the drop in revenues has been significant. The only solution is an end to the global recession. In the meantime, BA will have to keep on putting pressure on its cost base. Until there is any increase in demand, airlines in the full service long-haul segment will have to reduce capacity."

Robert Lea, London Evening Standard: "The extent of BA's losses and the admission he had followed the wrong strategy over the winter will heap the pressure on Willie Walsh, whose three-and-a-half years running the airline has put it in permanent revolution as he sought to deliver his pledge to make the carrier sustainably profitable. In a statement in which he blamed BA's woes on the global economic crisis, Walsh conceded: "We changed our focus during Q4 [January to March] from driving yields to securing volume as customers became more price sensitive." The comment is a significant admission from Walsh that his high-risk policy of concentrating on keeping up yields - the amount BA makes per passenger - has not worked."