BA to cut costs as losses extend into 2010

British Airways has said it is planning further cost reductions as it faces up to the prospect of a second consecutive year of losses.

Updating shareholders, the carrier said it is predicting an operating loss of about £150m in the next financial year to the end of March 2010, excluding severance costs. The losses would be similar to those already forecast for the current financial year.The carrier says it is cutting back operations at London Gatwick airport, where the short-haul fleet will be cut by a quarter next winter. It is aiming to cut its underlying non-fuel costs by £300m in the next two years, including £220m during the next year.

BA forecast its revenues next year would fall by about 5 per cent as demand dips, in particular from its cash-cow premium business.

The airline said it is only now reaping the benefits of oil prices because of the extensive fuel hedges it put in place to protect itself from the previous rise in fuel prices.

It announced that its fuel bill had jumped by almost 50 percent, or £950m, in the current year to about £3bn. It forecast a fall in fuel costs in the coming year of about 10 percent or £300m.

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The group has started talks with its trade unions on pay, productivity and performance and has already said it is aiming to freeze base pay. It is cutting capacity, in particular from services at Gatwick, and has taken out of service two of its Boeing 747-400s, the largest jets in its fleet.

BA has started talks with its trades unions about pay, productivity and performance.
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