31/07/2003

BA announces £40m losses

British Airways today posted a pre-tax loss of £45 million for the first quarter to June 30 – a huge turnaround on last year's £65 million profit for the same period.

In their quarterly report released today, the company estimated that the direct cost of the unofficial industrial disruption so far – from costs incurred and lost revenue – would be between £30 million to £40 million. In the longer term those losses could double as the damage BA's reputation is realised in terms of forward bookings.

Revenue in the quarter, at £1.8 billion, was down 10.7% and operating profit for the first quarter was £40 million – down from £158 million in 2002. However, BA's net debt was down £226 million to £4.9 billion since the start of the financial year.

In a statement, the air carrier said that the deterioration in operating profit reflected the "significant reduction" in revenue due to continuing economic weakness, the war in Iraq and the impact of Sars. This, the company said, was partially offset by cost savings delivered through the airline’s Future Size and Shape recovery programme.

BA Chief Executive, Rod Eddington, said: “This is the most testing period in aviation history. It continues to be an extremely challenging revenue environment due to the effect of Sars, the war in Iraq plus the ongoing economic weakness. Future Size and Shape cost efficiencies have partially offset the weak revenue in the first quarter.

“We must continue to modernise our business."

Yesterday, BA revealed that an agreement had been reached and trades unions had agreed to remove the threat of industrial action.

Mervyn Walker, British Airways director of Heathrow, said: "This is good news for our customers, staff and shareholders."

BA said that unions have accepted the introduction of the electronic swiping in and out system – which will become compulsory from September 1. Trades unions would then recommend a 3% pay offer to their members.

"British Airways and the three trades unions have agreed also to continue discussing other cost efficiencies in our business recovery plan in a new separate joint working party," the company said.

(GMcG)

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