High costs drive record losses at BA

22nd May 2009

  British Airways has reported the biggest loss since the company was privatised more than twenty years ago. The company reported a loss before tax of £401m for the year to 31 March, after seeing its results hit by a weak pound and higher fuel costs. British Airways’ chief executive Willie Walsh, said:

“Reduced passenger and cargo demand and high fuel prices last summer contributed to our £220 million operating loss as our total fuel bill reached almost £3 billion. The prolonged nature of the global downturn makes this the harshest trading environment we have ever faced and, with no immediate improvement visible, market conditions remain challenging. It is vital, therefore, that we remain absolutely committed to our plans to establish British Airways as a high-performing, market-focused, global premium airline.

“On revenue, we changed our focus during Q4 from driving yields to securing volume as customers became more price sensitive. We continue to actively manage the balance between yield and volume to ensure that we respond effectively to changing external conditions. Despite the fall in premium travel, our market share is growing currently and we must maintain this momentum. 

“We are taking action to mitigate the impact of the economic crisis on our business. Next winter we will continue to reduce capacity by taking out 4 per cent of flying compared to last year, parking up to 16 aircraft.



“We are taking action on non-fuel costs too. In addition to reducing external spend and not paying management bonuses, there are no base pay increases planned and we are offering staff the option of unpaid leave and temporary or permanent part time working. We are also in talks with our trade unions about pay and productivity changes. The results for the year include £78 million of redundancy related costs. Since last summer, our overall manpower has fallen by more than 2,500.

“While we focus on the immediate situation by reducing costs, investing in improved customer service is vital. With increasing competition and more consumer choice, we need to guarantee our future competitiveness by ensuring that we offer customers excellent service throughout their journey.

“We start from a good point. We ended the year with record customer ratings with 77 per cent of customers either extremely or very satisfied with their journey - a 13 point improvement over last year. More than 24 million passengers have flown through Terminal 5 and they love the improved punctuality, speedy baggage retrieval and lack of check-in queues. We have won numerous awards this year including the Daily Telegraph Ultratravel awards for best first class cabin, business class airline and shorthaul airline.

“We are committed to being the leading global premium airline. This year we will complete our Club World cabin upgrade and introduce a brand new First cabin while investing in premium cabin crew training to ensure that we can deliver service standards to match those experienced in the most prestigious hotels and restaurants.

“Both the US Department of Transportation and EU continue to assess our application for anti-trust immunity to operate a transatlantic joint business with American Airlines and Iberia and nearly 3,400 letters have been sent to the US Department of Transportation supporting our application. We are optimistic that anti-trust immunity will be approved in the next six months so that in early 2010 we can start to bring benefits to our customers, employees and shareholders, and enjoy a level playing field for oneworld with the two other global airline alliances.

“Finally, the UK Government’s recent decision to double Air Passenger Duty from 2010 will undoubtedly disadvantage the UK’s competitive position within the airline industry.”

British Airways’ chairman Martin Broughton said:

“In the last twelve months we have gone from a record profit to a record loss due to the current tough economic environment. That only serves to underline the extremely difficult trading conditions that we are facing, despite our best ever operational performance, and any recovery is likely to take longer than initially envisaged.

“The revenue outlook continues to be weak during the current financial year but we expect lower fuel prices to reduce our fuel costs by approximately £400 million.

“In light of this, the board is unable to recommend a dividend this year.”


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