British Airways has issued a profit warning, saying it would make an annual operating loss of around £150 million after costs rose by more than expected, compared to a forecast repeated earlier this month of a small operating profit.
The principal culprit was currency movements, which the airline blamed for an 8% year-on-year rise in non-fuel costs, compared to previous guidance of 5%.It now expects results for the third quarter to December 31 to show an operating loss of £50 million, leading to a possible deficit of £150 million for the year to March 31.
BA said in a statement: “Further economic weakness in January and the outlook for February and March combined with the fall in sterling, are impacting our outlook for the year.”
The airline said its revenue forecasts for the full year remained unchanged but it now expected non-fuel costs to rise 8% this year, versus an earlier forecast of 5% due to the weakness of the Pound.
A BA spokesperson confirmed the carrier’s talks with Iberia were still progressing despite the profit warning. However the slump in BA’s latest share price fall has altered the valuations of the two carriers, with the market value of Iberia now greater than that of BA’s.
Weekend press speculation however suggested all was not well with merger. The Mail reported that Willie Walsh said Iberia was “over-priced” and would rather walk away from the £3.5bn tie-up if the ownership split is based on recent valuations.
At the time talks were announced last July, analysts had been expecting BA to make up around two thirds of the merged group, but the share performance of the pair since then has seen Iberia overtake BA in terms of market capitalisation.