BA reports surprise profit but still on course for record losses

British Airways has surprised the markets by posting its first operating profit in more than a year, but still expects to rack up the heaviest annual losses since privatisation in 1987.

The flag carrier reported a £25m operating profit in the third quarter, against analyst predictions of a loss of £90-£100m, and a loss of £51m year-on-year, despite the big freeze and the threat of strike action disrupting operations.

BA’s chief executive Willie Walsh said the results highlighted the impact of permanent cost reductions across the airline.

“Those changes, combined with capacity reductions and external spending cuts, mean operating costs are down by 10.5 per cent,” he said.

Pre-tax losses shrunk from £122 million last year to £50 million, although revenues fell by 12.9 per cent due to capacity cuts.

The airline said it had cut operating costs by nearly 11 per cent, helped by lower jet fuel prices and continued savings from its restructuring programme.

However, the airline remains on course to make a record full-year loss for the 12 months to March 31. Over the first nine months of its financial year, pre-tax losses were £342 million compared to £70 million last year.  Over the same period, it registered an operating loss of £86m, compared with a £89m profit in the same period in 2008.

Walsh added: “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.”

The airline is expected to report a full-year pre-tax loss of around £580 million on revenues of nearly £8 billion - its worst performance since privatisation in 1987.

Passenger numbers were 7 per cent lower in January year-on-year, with premium down 2.1 per cent and economy down 7.9 per cent. It said disruption from snow affected traffic and capacity during early January, particularly the volume of transfer passengers.

Walsh also confirmed that the merger with Iberia is expected to take place before the end of the year, and he also remains confident of receiving regulatory approval for its proposed transatlantic joint venture with American Airlines and Iberia.

Apart from the threat of strike action by staff, BA must deal with a £3.7 billion deficit in its pension fund by June.