BA profits tumble as costs soar in ‘bleak’ period

British Airways’ half year pre-tax profits tumbled from £616 million to just £52 million over the summer period.

The airline said it was focused on achieving a ‘small profit’ in the financial year.

Operating profit came in at £140 million against £567 million for the same six months last year.

The reduced profits came despite a 6.4% rise in half year revenues to  £4,754 million from £4,470 million.

Full year fuel costs still expected to be about £3 billion, the airline said. Fuel costs were up 52% on last year, despite a fuel hedging profit of £329 million during the six months to September 30.

BAA implemented “significant price increases” for Heathrow and Gatwick, with an overall effect of increasing Heathrow prices by 38% and Gatwick by 36% for the remainder of the year, BA said.

As part of the planned 2009 summer schedule, four services have been suspended – Heathrow to Dhaka and Kolkata and Gatwick to Dublin and Zurich.

Atlanta flights will move to Heathrow from Gatwick from March 29, 2009, made possible by the EU-US open skies agreement.

A continuing restructuring will see around a third of the 1,350 eligible managers take voluntary severance and most will leave the company by the end of the year.

Looking forward, BA said the industry continued to face “very difficult trading conditions” on the back of a weak economic environment.

Reviewing the half year, chief executive Willie Walsh said: “The six month period will be remembered as one of 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.

“Against this very tough economic backdrop we have delivered profits of £140 million resulting from a 6.4 per cent revenue increase.

“Costs are up £711 million and remain a key challenge. Fuel costs for the period were up £511 million at £1,494 million. Our annual fuel bill is still expected to be up some 50% at about £3 billion. Employee costs, including a £40 million severance provision, were up 8.6%.”

He added: “We have made good progress with our plans to offset the difficult conditions. We have reviewed the summer 2009 schedule and plan to reduce capacity by some one per cent compared with summer 2008. We have revised capital expenditure plans and remain focused on cost control and our strong cash position.
     
“In these difficult times it is more important than ever to deliver excellent customer service.”  

Walsh said he expected BA’s business agreement with American Airlines and Iberia to receive approval from the US Department of Transport next year.

He described Heathrow Terminal 5 as “performing extremely well” following its chaotic opening in March, which led to widespread criticism.

“Transfer passenger connections are faster with 90% of our Heathrow flights now under one roof,” said Walsh.

“We have now moved to full operations at Terminal 5 and it is delivering real customer benefits. The terminal is proving to be the genuine asset that we always expected it to be. More than 12 million customers have now travelled through the terminal and customer feedback has been excellent.

“Our punctuality performance has improved significantly. Our passengers are departing more promptly than in recent years and we are improving every month.

“Heathrow punctuality levels in July, August and September were more than 20 percentage points better than the same period last year.

“Last month saw an improvement of 23 percentage points on October 2007.

“We also had our best ever day at Heathrow on October 14, with 95% of flights departing on time as measured by the industry standard.”  

BA is pushing ahead with double daily, business class-only flights from London City airport to New York next year. The first Airbus A318 aircraft to operate the service will feature fully flat business class beds for up to 32 passengers.