BA faces further ‘essential’ cost cuts
Thursday, 06 Nov, 2009
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British Airways’ boss Willie Walsh says further cost reduction is “essential” at the airline as it revealed record half year losses of almost £300 million.
The pre-tax loss of £292 million for the six months to September 30 included an operating loss of £111 million against a profit of £140 million in the same period last year.
Total revenue in six months was down 13.7%.
BA recorded a loss of £401 million the previous year
The carrier is responding by cutting winter capacity by six per cent, reducing staff numbers by a further 3,000 by March 2010 and making “permanent changes” to the way the business is run.
BA’s summer capacity was trimmed by 3.5 per cent and manpower was reduced by 1,900 through reduced overtime, increased part time working and targeted voluntary redundancy in order to trim costs by £400 million.
The carrier is to go ahead with changes to cabin crew working on November 16 after the High Court failed to grant an injunction sought by the Unite union against cost cutting plans.
BA says the changes for existing cabin crew involve no alteration to any part of their contract of employment.
“There are no reductions in base salary and payment of incremental increases, worth between two and seven per cent for more than 10,000 crew are going ahead. Overall, 75 per cent of existing crew benefit from these incremental increases.”
BA urged the cabin crew union Unite to withdraw its plans for an industrial action ballot, which could result in a pre-Chistmas strike, and resume discussions “on other ways of ensuring that we get into the right shape to secure long-term profitability in the interests of our customers and all our staff”.
Delivering the half-year results, Walsh said: “Aviation remains in recession with IATA predicting that the industry will lose $11 billion this year.
“We were quick to respond to the crisis by taking out excess capacity and, at the same time, driving down unit costs by 5.2 per cent.
“This demonstrates how well our costs have been managed in the first half and it’s imperative we continue to deliver on our plans to reduce costs further in the second half.
“With revenue likely to be £1 billion lower this year, we can’t stand still and further cost reduction is essential.”
Walsh added: “The global airline industry is facing continued pressure on yields highlighting a significant shift within the industry.
“We will introduce further structural change in the second half to secure the long term future for our business.”
BA’s Club World refurbishment is nearly complete and a new First cabin will be introduced in the new year.
“Premium leisure demand has been strong during the last six months and we’re investing in new leisure destinations with six new routes starting this winter,” added Walsh.
“We continue to reap the benefits of Terminal 5 following our first full summer in the terminal. We’ve had record punctuality throughout the summer and this continued last month with our best ever October. Our baggage performance has hit record levels too and we continue to see high customer satisfaction ratings.”
The principal risks and uncertainties facing BA remain relevant for the remaining six months of the year, the airline said.
The risks include brand reputation, competition, consolidation/deregulation, debt funding, employee and industrial relations, environment, fuel price and currency fluctuation, fuel supply, global extended economic slowdown/credit crunch, government intervention, Heathrow operational constraints, key supplier risk, pensions and safety/security incident.
by Phil Davies
Phil Davies
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