British Airways has unveiled its first ever summer losses as it presented its interim management report for the six months to the end of September. The report revealed an operating loss of £111 million (2008: profit of £140 million) and a pre-tax loss of £292 million.
It is the first time BA has reported a loss in the first half of its financial year and last year it reported a profit of £52m for the same period. The company made a surplus of £616 million in 2007 and in an effort to put a positive spin on the results British Airways’ chief executive Willie Walsh, said:
“Aviation remains in recession with IATA predicting that the industry will lose $11 billion this year. We were quick to respond to the crisis by taking out excess capacity and, at the same time, driving down unit costs by 5.2 per cent. This demonstrates how well our costs have been managed in the first half and it’s imperative we continue to deliver on our plans to reduce costs further in the second half. With revenue likely to be £1 billion lower this year, we can’t stand still and further cost reduction is essential.
“We reduced summer schedule capacity by 3.5 per cent, our costs are some £400 million lower and manpower has been cut by 1900 through reduced overtime, increased part time working and targeted voluntary redundancy. Total liquidity of some £4 billion puts us in a strong position.
“The global airline industry is facing continued pressure on yields highlighting a significant shift within the industry. We will introduce further structural change in the second half to secure the long term future for our business. We are cutting winter capacity by 6 per cent and making further manpower reductions of 3000 by March 2010 and permanent changes to the way we run our business.
“We’re continuing to innovate with new services for customers to strengthen our position as the leading global premium airline. We launched our London City to JFK all-business flights and they’re proving popular with customers with booking levels ahead of expectations. More widely, we’re offering customers the option to pay to reserve seats more than 24 hours in advance and have seen an excellent response to this new initiative. Upgrading our cabins continues and, with our Club World refurbishment nearly complete, we will introduce a new First cabin in the New Year.
“Premium leisure demand has been strong during the last six months and we’re investing in new leisure destinations with six new routes starting this winter.
“We continue to reap the benefits of Terminal 5 following our first full summer in the terminal. We’ve had record punctuality throughout the summer and this continued last month with our best ever October. Our baggage performance has hit record levels too and we continue to see high customer satisfaction ratings”.
There was some marginally better news for BA yesterday after the Unite union failed to win an immediate legal ruling to prevent changes to proposed working practices.
Unite had sought a High Court injunction to block BA introducing new working arrangements on November 16the. However, after legal submissions from both sides, Unite has agreed to wait for a full trial on February 1 to examine its contention that the changes are a “breach of its members’ contracts”.
The new arrangements include reducing crew numbers on flights and cutting various allowances – as well as a pay freeze, 1,000 redundancies and transferring 3,000 crew to part-time working.
BA said it would “go ahead with these changes on November 16” and urged Unite to withdraw its strike plans.
“BA conceded that it has a serious issue to answer in relation to the alleged breach of its members’ contracts,” Unite said in an e-mailed statement. If the February ruling goes against the airline it will have to compensate crews and return staffing to previously agreed levels, the union said.
The union will continue with its planned strike ballot of British Airways cabin staff and the result of the strike vote will be known on 14 December.