Capacity in February, measured in Available Seat Kilometres, was 10.5 per cent below February 2001. Traffic, measured in Revenue Passenger Kilometres, fell 2.5 per cent. The reduction in traffic comprised a 7.8 per cent decline in premium traffic and a 1.4 per cent fall in non-premium traffic. Passenger load factor of 71.7 per cent was up 5.9 points on February 2001. Cargo, measured in Cargo Tonne Kilometres, fell by 9.0 per cent.

Market conditions:Traffic improvements have continued in February. The seat factor of 71.6% is the highest in ten years for the month of February. While positive, the improvements have benefited from reduced capacity and continued fare discounting.

Costs: The cost cutting initiatives launched after September 11th and as part of Future Size and Shape continue. As at January 31st manpower equivalents have reduced by 6,400, since August 2001. Fuel costs are expected to be some 6% lower than last year due to a smaller flying programme, more fuel efficient aircraft and lower fuel prices.

Strategic developments: British Airways unveiled a major package of measures designed to return the airline to profitability, following a wide-ranging analysis of its business led by chief executive Rod Eddington. The conclusions of the review - known as ‘Future Size and Shape’ - signal a significant change to the size of British Airways as it takes further steps to address its cost base and sets the company on course to achieve a 10 per cent operating margin. This will be supported by an annualised cost saving of £650 million achieved by March 2004, with £450 million of this secured by the end of the first year (2002 - 2003).

There will be a further 5,800 job losses over the next two years, in addition to 7,200 announced in September 2001. In total, this amounts to a manpower reduction of 13,000 or 23 per cent of the workforce of 56,700 in August 2001. Head office and support staff will reduce by more than a third (36 per cent). The company wants to achieve the manpower reduction by voluntary means and will
more work with the trade unions to achieve the target. The airline is making a provision of £200 million over the next two years for restructuring costs.

British Airways will restructure its European short haul business to provide a competitive response to the no-frills carriers. This will include a change to its short haul pricing structure - giving business travellers and holiday makers lower fares, greater flexibility and more choice - a simpler short haul fleet and higher aircraft utilisation. The new pricing structure will be rolled out from June 2002.

British Airways has also taken a major step towards simplifying its business systems with the introduction of the Amadeus sales system across the airline. The Amadeus system replaces the British Airways Booking System (BABS) which had been used for more than 30 years. Introduction of the Amadeus sales system is the third of five milestones in a strategic partnership between the airline and Amadeus announced in August 2000. Paul Coby, Chief Information Officer for British Airways, said: “The various Amadeus systems we are already using and our ongoing Partnership with Amadeus and Qantas, will lay the foundations for world-leading customer facing British Airways’ systems in the years to come and delivers very significant cost benefits.”

The Chief Executives of the eight oneworld member airlines underlined their commitment to the alliance by accelerating plans to deepen working relationships between the partners, delivering more benefits for customers and adding more value for shareholders. Rod Eddington Chief Executive of British Airways, speaking on behalf of all the Chief Executives, said: “oneworld is a strong alliance, providing services that our customers value and generating substantial cost efficiencies and additional revenue for our members. We are determined to build on this success, by continuing to work harder and smarter than our rivals, developing the overall best alliance customer services and products and generating even more benefits for our members.”

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