Positive BA results ‘encouraging’

3rd Feb 2006

British Airways has reported a pre-tax profit of £164 million for the three months to December 31, 2005 against £151 million for the same period last year.For the nine months, the pre-tax profit was £529 million (2004: £519 million profit).
ÊOperating profit for the quarter was £175 million (2004: £136 million).Ê For the nine months, operating profit was £612 million (2004: £510 million).Ê The operating margin
Êfor the quarter was 8.2 per cent, 1.3 points higher than last year.
ÊWillie Walsh, British Airways’ chief executive, said: “These are encouraging results which reflect better revenue and the continued efforts of our people to strengthen the business.
Ê“Revenue is up 8.8 per cent, driven by strong traffic volumes particularly in the premium cabin.Ê Increased volumes have been achieved through significant promotional activity.Ê
Ê“Total costs are up by 7.3 per cent but we have initiatives underway to reverse the trend, such as management reductions, changes to working practices, reduced absenteeism and restructuring unprofitable parts of the business.
Ê“Tackling our pension deficit is a major part of making our cost base more competitive.ÊÊ We have come to the end of a staff awareness programme on the implications of the significant deficit and we are reviewing the feedback before starting consultation with the trades unions and trustees by the end of March.
“We continue to develop and enhance our route network and products.Ê Our new services to Bangalore and Shanghai are both ahead of target, regional services will be relaunched in March, six new European routes will soon start at London Gatwick and in the summer we will unveil our £100 million investment in Club World, our longhaul business class product.”
Martin Broughton, British Airways’ chairman, said: “Some yield improvement is still expected for this financial year. Consequently, revenue is now expected to grow by more than 8 per cent.Ê Despite the improved revenue outlook, market conditions remain broadly unchanged as significant promotional activity is required to maintain seat factors.

“Underlying costs, excluding fuel, are now expected to be some one per cent higher than the guidance we gave at the beginning of the year, which was flat.Ê Fuel costs continue to be a challenge for the industry, but our guidance is unchanged with total fuel costs expected to be up by £525 million this year.
“Our focus remains on preparing for the move to Terminal 5 in 2008, investing in products for our customers and continuing to drive simplification to deliver a competitive cost base.”
ÊGroup turnover for the third quarter at £2,129 million was up 8.8 per cent on a flying programme 3.7 per cent larger measured in available tonne kilometres (ATKs).Ê This reflected the impact of increased passenger and cargo revenue and fuel surcharges.Ê Passenger yields were down 1.5 per cent, measured in pence per revenue passenger kilometres (RPKs). Seat factor was up 1.3 points at 74.1 per cent on capacity 3.9 per cent higher measured in available seat kilometres (ASKs).
ÊFor the nine month period, turnover improved by 8.4 per cent to £6,393 million on a flying programme 2.5 per cent higher in ATKs.Ê Passenger yields were up 0.5 per cent with seat factor up 1.1 points at 76.5 per cent on capacity 2.5 per cent higher in ASKs.For the quarter, unit costs were down 1.8 per cent on the same period last year as a result of a net cost increase of 1.8 per cent on capacity 3.7 per cent higher in ATKs.The improvement in ATKS includes a 2 point increase due to temporary reductions in the flying programme in the third quarter last year.
Total operating costs in the quarter increased by 7.3 per cent.Fuel costs rose 28.2 per cent due to the increase in fuel price net of hedging, a stronger US dollar and a larger flying programme.Ê
Employee costs were up by 8.3 per cent as wage awards and higher pension contributions were only partially offset by manpower reductions.This includes a £10 million restructuring provision to support the first phase of the management restructuring programme announced in November 2005.Ê


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