British Airways today unveiled pre-tax profits of £310 million for the nine months to December 31, 1998, compared with £510 million for the same period the year before. At 7.7 per cent, operating margin was 1.2 points up on a year ago. Productivity for the period was up 7.6 per cent.
Some 34.8 million passengers flew with the British Airways group during the nine months, equivalent to 126,000 a day.
Group losses before tax for the three months ended December 31, 1998, were £75 million - compared with profits of £80 million for the same period the year before. This included a one-off book charge of £117 million on Japanese Yen debts used to fund aircraft acquisitions. Without this non-cash accounting charge, the figures for the quarter would have shown a profit of £42 million. At 4.3 per cent, operating margin for the quarter was up 0.3 points compared with a year ago.
The Business Efficiency Programme (BEP), the £1 billion cost-efficiency drive announced by British Airways in 1996, continues to deliver excellent results. It will deliver savings of £600 million this year, £100 million ahead of target. Unit costs (pence per ATK) for the quarter were 11.4 per cent lower.
The benefits from on-going cost efficiencies achieved by the BEP have helped considerably to offset the effects of the current trading conditions, which have witnessed a reduction in yields, caused by discounting and by a decline in business traffic.
Bob Ayling, Chief Executive, said: “Economic conditions and increased competition on our routes have resulted in excess capacity which is forcing yields down. But investors can look beyond the short-term with confidence. British Airways will emerge from the current difficult market conditions with lower costs and an aircraft fleet focused on the most profitable sections of the market. By 2002, nearly half our longhaul fleet will consist of Boeing 777s, which are smaller than the 747s we have traditionally flown. With the same number of First and Club class seats, the Boeing 777 will have less space in the economy section than the 747s. Removing discounted seats will boost passenger yields and improve operating margins and return on assets.”
Lord Marshall, Chairman, said: “British Airways` new fleet strategy is putting us in good shape to respond effectively to future market conditions. The medium- to long-term prospects for the business are very good indeed.”