British Airways is planning a wave of capacity cuts this winter to avoid plunging into the red. The carrier will reduce the amount of flights on its routes, cease some services between October and March, and impose a hire freeze, as it battens down the hatches in the face of record fuel prices.Willie Walsh, BA Chief Executive, said the global economic downturn was affecting demand for air travel. He said: “I have no doubt the prices people are paying for energy are beginning to hit, and people are seeing higher prices for food. Generally, the economic environment is softer than it was six months ago.”
At the airline’s AGM, Martin Broughton, BA’s Chairman, said: “It will be a considerable achievement for British Airways to break even this year.”
BA will announce its new timetable alongside first-quarter figures next month. Walsh said there would be fewer services on the least cash-generative routes. However, no more than two out of 154 routes would be axed.
Walsh added that there were no plans to cut jobs from BA’s 42,300-strong workforce, allaying trade union fears that a recent cost review would trigger redundancies.
However, BA is expected to save on payroll costs by not replacing departing workers. Walsh said plans to recruit more cabin crew over the winter would be put on hold due to the capacity reduction. “Given that expansion will not take place, we don’t need to recruit people for the winter period,” he said.
He also warned that fares will go up, rising by 4% at least, adding a minimum of £130 to a premium-class London-New York return flight.
High fuel surcharges and a slowing economy are already hitting BA’s figures, with the decline in BA traffic accelerating to 3.7% in June as the airline carried 87,000 fewer passengers.
BA reckons it will be less affected by high fares than would low-cost airlines, because about 50% of its customers are business people who are less sensitive to price increases. Still, Walsh admitted, fare rises will have an impact on demand.
BA reported record pre-tax profits of £883m in the year to March, but every US$1 rise in the oil price knocks £16m off its profits, and it slips into a loss, along with the vast majority of airlines, if crude stays above $125 a barrel.