British Airways Adapts to Current Changes in Market While Setting Plans for Future
British Airlines, Europe’s third largest airline, said traffic fell 5.9 percent in November as the economic slowdown hurt business travel. Traffic, or passengers carried multiplied by the distance flown, declined 11 percent for first- and business-class travelers from a year earlier, while economy traffic fell 4.8 percent, the airline said today in a statement. The load factor, or proportion of seats filled, dropped 2.2 percentage points to 74.4 percent.
“It’s a significant decline in premium traffic, with the Americas region affected most,†said Geoff Van Klaveren, an analyst with Exane BNP Paribas in London who has an “underperform†rating on the stock. “This shows that the financial crisis is impacting BA now.â€
British Airways said yesterday that it’s in talks with Qantas Airways Ltd. of Australia about a merger that would help reduce costs as the industry’s losses mount. The International Air Transport Association said last month that global air travel fell for a second consecutive month in October. The group predicts combined losses of more than $5.2 billion this year.
British Airways declined 0.1 percent to 156.9 pence in London trading, giving the company a market value of 1.81 billion pounds ($2.67 billion). The shares have plunged 49 percent this year.
“Trading conditions remain broadly unchanged, with long- haul premium traffic stable and consistent with the trends of recent months,†BA said in the statement. “Financial guidance for the year remains unchanged.â€
European airlines as a group posted an increase in passenger traffic for October of 0.1 percent, the Association of European Airlines said today. The increase followed a drop of 0.9 percent in September, though the association called the reversion to growth “illusory.†The October figure included recovery of traffic lost to strikes a year ago, it said. Discounting that would yield a decrease of 1.5 percent, AEA said.
First- and business-class traffic at British Airways has gotten progressively worse for three months, with a 9.2 percent decline in October and 8.6 percent in September. Economy-class traffic declined 3.3 percent in October.
British Airways has accomplished “a meaningful†reduction in capacity, Treasurer George Stinnes told reporters on a conference call. The cuts were led by a 6.9 percent reduction in capacity to the U.S. in November, including trimming available seats on flights to New York, Los Angeles and Seattle.
The airline is maintaining prices as it reduces capacity, in contrast with low-cost carriers that are slashing fares to fill seats.
“Discussions with Qantas are at a very early stage,†Stinnes reiterated. British Airways is also pursuing an application for antitrust immunity to cooperate with American Airlines on trans-Atlantic routes. “We would be very happy to consummate all of these transactions,†Stinnes said.
Source: Bloomberg
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