BRITISH AIRWAYS yesterday said it had plunged to a record full-year loss of £401 million (€455 million) from a record profit a year earlier with a £1.3 billion reversal in its fortunes – the worst slump in its history.
Willie Walsh, chief executive, warned yesterday that the “prolonged nature of the global downturn makes this the harshest trading environment we have ever faced”. He said there was “no immediate improvement visible”.
The airline scrapped its dividend, which had only been reinstated a year earlier after a prolonged gap of paying no dividends since 2001.
Shares in BA fell 6.8 per cent in early London trading but recovered some of those losses to stand 6.1p or 3.7 per cent lower at 156.7p in afternoon trading. The UK flag carrier said the airline industry continues to face very difficult trading conditions, with considerable uncertainty over the likely timeframe of the global economic downturn.
Current levels of traffic volume and average fare levels had not improved from the last quarter of the financial year from January to March, and BA said it was unable to provide any financial guidance for the current year or even for the first half because of the difficulty in forecasting revenues.
It is continuing to cut thousands of jobs, with 2,500 posts eliminated since last summer, and is locked in difficult negotiations with its trade unions on further cuts and productivity improvements. BA said it was cutting capital expenditure in an effort to conserve cash. It was not paying any management bonuses, no base pay increases were planned and it was offering staff the option of unpaid leave and temporary or permanent part-time working.
BA was hit last year by reduced passenger and cargo demand, with a particularly sharp fall in demand from the most lucrative business travellers, and by high fuel prices last summer. It reported yesterday a slide in its financial performance to a pretax loss of £401 million last year from a pretax profit of £922 million a year earlier. It had an operating loss of £220 million, including severance costs of £78 million, down from an operating profit of £878 million a year earlier.
Revenues for the full year rose slightly from £8.76 billion to £8.99 billion, but there was an underlying fall of 3.7 per cent excluding exchange effects.
Crucially, the airline was hit by a rise of nearly £1 billion in its fuel bill to £3 billion, as its large volume of high price fuel hedges prevented it from benefiting from the sharp fall in the fuel price from the peak last summer. It predicted a fall in the fuel bill of about £400 million this year.
The airline added that it was being forced to cut capacity again by a further 4 per cent in the coming winter season with the grounding of 16 aircraft following cuts in capacity of 3.1 per cent last winter and of 2.5 per cent this summer.
BA’s financial strength was undermined as its cash balance fell to just under £1.4 billion at the end of March. – (Copyright The Financial Times Limited 2009)
