BA profits bomb as fuel prices and downturn kick in

1st Aug 2008

British Airways boss Willie Walsh warned today that the aviation industry is in the “worst trading environment” ever faced as he unveiled an 88% slump in quarterly profits and the closure of six short-haul routes.BA will also be cutting winter capacity, which will see over 160 flights per week cut. Its Gatwick airport hub is the most affected, with services to Newquay, Dresden, Sarajevo and Poznan being dropped altogether. Plans to open new services between Gatwick and Oporto and Valencia have been canned.

Flights on the Heathrow to JFK route, the most profitable in the industry, are being cut from eight to seven per day. Heathrow to Tokyo services will reduce from two daily flights to just one. Hong Kong, Los Angeles and Washington are also being cut back.

A doubling of fuel costs has slashed its second quarter profits from £298m to £37m. Willie Walsh, said: “We are in the worst trading environment the industry has ever faced. The combination of unprecedented oil prices, economic slowdown and weaker consumer confidence has led to substantially lower first quarter profits.

“Fuel prices have doubled in the past year. A successful hedging programme mitigated the impact but nevertheless fuel costs at £706 million were up £233 million in the quarter. We expect our fuel bill to top £3 billion this year - the equivalent of more than £8 million every day.

“We have ordered six new Boeing 777-300ER aircraft for delivery beginning in 2010. They are 23 per cent more fuel efficient than the Boeing 747-400 and give us additional flexibility in the long-haul fleet.”


Walsh also confirmed that merger talks with Iberia are pushing ahead. He said: “It will be several months before talks are finalised but we are confident of securing regulatory approval. Our talks with American Airlines and Iberia towards further cooperation are progressing well.”


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