British Airways forecasts record annual loss

LONDON, Feb 5, 2010 (AFP) - Struggling British Airways on Friday forecast a record loss in its current financial year owing to weak demand for air travel and despite sharp cost cutting.

BA made the admission in a third-quarter results statement which also revealed that pre-tax losses stood at a better-than-expected 50 million pounds (57 million euros, 79 million dollars) in the three months to December.


That compared with a pre-tax loss of 122 million pounds in the same period of 2008 and easily beat market expectations for a loss of 150 million pounds.

"These results highlight the impact of permanent changes across the company on our costs," said Chief Executive Willie Walsh in the earnings release.

But he also warned: "While we are on the right track, we still expect to make record losses this year.

"Permanent structural change is being introduced in all areas and will return us to sustained profitability."

In reaction, BA's share price dived 2.37 percent to 206.3 pence on London's FTSE 100 index of top companies, which was down 1.80 percent.

The troubled airline also announced that it made an operating profit of 25 million pounds in the third quarter, after a loss of 51 million pounds a year earlier.

The improved performance was due to a 10.5-percent drop in operating costs and marked the first operating profit since the second quarter of the previous financial year to March 2009.

"The update comes as something of a pleasant surprise, notwithstanding that the company remains on target to report an annual record loss," said analyst Richard Hunter at Hargreaves Lansdown Stockbrokers.

BA, which is attempting to merge with Iberia of Spain, has implemented a series of cost-cutting measures in recent months designed to help return it to profitability.

Hunter warned that the company was still facing "headwinds" in the form of a potential strike by cabin crew, a soaring pension deficit and intense competition from low-budget airlines.

"The headwinds are still in clear focus. Potential strike action, the pension deficit, fierce competition and volatile fuel prices are all matters which need urgent attention," he said.

"The potential tie-ups with both Iberia and American Airlines could provide a slightly brighter horizon," he added.

BA, American Airlines and Iberia said in 2008 that they had signed an agreement to cooperate on flights between North America and Europe to help overcome soaring fuel costs and falling demand.

The airline said Friday that net losses in the nine months to December nearly doubled to 245 million pounds, compared with a loss of 127 million pounds in the same period of 2008.

Group revenues sank 12.9 percent to 6.14 billion pounds in the nine-month period.



© 2010 AFP