Cost Savings Drive Better Results for BA

British Airways today reported a pre-tax profit of £125 million for the three months to December 31, 2003 against a pre-tax profit of £25 million for the same period last year.
The three month pre-tax figures took the results for the nine months to a profit of £185 million, (2002: £335 million profit).
Operating profit for the quarter was £138 million, (2002: £53 million). For the nine months, operating profit was £373 million (2002: £459 million).

Rod Eddington, British Airways’ chief executive, said: “We have survived the most testing period in aviation history. It would not have been possible without the determination of our people to keep British Airways flying through these troubled times, while taking £1.7 billion costs out of the business.

“These are good results and a significant improvement on last year. They show what we can achieve when we are focused on delivering our cost targets. For example, under our future size and shape programme, manpower reductions stand at 12,652 against a 13,000 goal to be achieved by March 2004.

“The challenge now is to build on our achievements and deliver sustained profitability through further cost reductions while continuing to deliver great service. We will continue to simplify the travel experience for customers through better use of new technology.

“Half of our customers now use e-tickets and at peak times our website takes 1,000 flight bookings an hour. Customers can also now choose their seats and order special meals through and later this year they will be able to change unrestricted tickets on-line. In an average week, a quarter of a million members of our Executive Club loyalty scheme log on to the site.


“Delivering the £300 million saving on employee costs we announced recently, and other business plan initiatives, is key to achieving a 10 per cent operating margin.”

Lord Marshall, chairman, said: “Security issues are having some impact on forward bookings. Long-haul premium volumes, however, remain above last year’s levels but short-haul premium demand remains weak. Non-premium traffic volumes remain very sensitive to yield.

“The continued delivery of our future size and shape strategy and the recently announced business plan cost improvement programme, remains central to sustained profitability.”

Unit costs improved for the seventh consecutive quarter and were down by 5.4 per cent on the same period last year. This reflects a net cost reduction of 2.9 per cent on capacity 2.7 per cent higher in available tonne kilometres (ATKs).

Borrowings, net of cash, short term loans and deposits, were £4,511 million at
December 31, down £2.1 billion from the December 2001 peak.

Group turnover for the third quarter at £1,891 million was up 1.8 per cent on a flying programme 2.7 per cent larger, as measured in ATKs. Passenger yield, measured in revenue per revenue passenger kilometres (RPKs), in the third quarter was down 0.8 per cent (2002: down 4.5 per cent). Seat factor for the quarter was up 1.8 points at 72.7 per cent on capacity which was 0.8 per cent higher in available seat kilometres (ASKs).

Cargo volumes for the quarter were up 9.9 per cent, measured in cargo tonne kilometres (CTKs), compared with last year. Yields were down 10.4 per cent, measured in cargo revenue per CTK.

Overall load factor was up 1.7 points at 68.7 per cent. For the nine months, overall load factor was up 0.8 points at 68.1 per cent.