BA flies into first quarter loss

British Airways today reported its first first quarter loss since its privatisation in 1987. It said it had moved from a pre-tax profit in the first quarter last year of £37m to a loss this year of £148m. It made a £94m operating loss and the deficit was £106m at the net level. Meanwhile revenues were 12 per cent lower at £1.98bn.

As a result of falling passenger numbers in the global downturn the airline has been struggling to make ends meet. It has had to delay aeroplane deliveries and cut back on other costs, but its biggest battle has been over staff reductions. It wants to cut 4,000 jobs but has faced stiff resistance from unions and workers alike over the proposals. Chief executive Willie Walsh has been working without pay in July and asked other employees to follow his example.

Walsh said of the results: "The industry continues to face very difficult trading conditions, with considerable uncertainty over the likely timeframe of the recovery. We continue to work towards a permanent structural change to our employee cost base, which is essential to our short term survival and long term viability."

Passenger declines have been particularly obvious in premium travel, with declining first and business-class traveller numbers contributing to a 3.8 per cent drop in traffic over the period.

The carrier is struggling on all fronts, with its pension fund deficit derailing plans for a merger with airline Iberia. However it did recently manage to raise £680m in capital to help fund its survival through the downturn.

WHAT THEY ARE SAYING:

Dan Milmo in the Guardian: "BA's problem, as with other airlines, is that airlines are having to slash fares as competition intensifies for cash-conscious travellers...The downward pressure on fares means that BA has to reduce its cost base - costs fell 6.6% over the period but revenues fell at nearly twice that pace."

Jane Wardell in Forbes: "Walsh has been one of the most pessimistic airline industry executives about the sector, warning that BA is in a "fight for survival" and that the carrier's key premium traffic may never fully recover. The normally more robust budget carrier Ryanair Holdings PLC spooked the market earlier this week by scaling back its full-year profit forecasts to the bottom end of its forecast range..."