British Airways Traffic and Capacity

In March 2003, overall load factor fell 4.2 points to 65.4 per cent. Passenger capacity, measured in Available Seat Kilometres, was 3.1 per cent below March 2002 and traffic, measured in Revenue Passenger Kilometres, was lower by 11.4 per cent. This resulted in a passenger load factor down 6.6 points versus last year, to 69.2 per cent. The fall in traffic comprised a 23.8 per cent reduction in premium traffic and a 9.2 per cent decrease in non-premium traffic. These numbers were impacted by the timing of Easter versus last year. Cargo, measured in Cargo Tonne Kilometres, fell by 4.0 per cent.

For the January - March quarter, ASKs reduced by 3.1 per cent, with RPKs falling by 6.5 per cent. This resulted in a decrease in passenger load factor of 2.5 points, to 69.5 points. This comprised a 15.7 per cent fall in premium traffic and 4.8 per cent fall in non-premium traffic. CTKs fell by 1.1 per cent.

Market conditions:
Revenue and forward bookings have been impacted by the threat and outbreak of war with Iraq. The reductions are in line with company expectations. There is currently limited forward visibility on revenue and traffic reflecting the war, economic uncertainty, competitor activity and the impact of SARS. The latter has already affected bookings, in particular, on Far East routes.

Costs:
As a result of Yen appreciation against sterling, there will be a non-cash accounting charge of £18 million in the fourth quarter financial results. Fuel costs for the financial year ending 31 March 2004 are still expected to be approximately £100 million higher than for the year ended 31 March 2003. The company is currently some 70% hedged in quarter one and some 45% hedged in quarter two.

Strategic Developments:
British Airways announced a package of measures in response to the impact on its business of the conflict in Iraq. Following the actual and anticipated downturn in passenger traffic, the airline implemented a reduced flying programme and an acceleration of its Future Size and Shape restructuring programme. The measures include:
- An overall capacity reduction of four per cent in April and May, involving reduced frequencies and the use of smaller aircraft.
- The Future Size and Shape programme’s overall manpower reduction target of 13,000 by March 2004 accelerated to September this year.
- An extension of the company’s unpaid leave scheme for staff.
- A review of all capital expenditure and external spend.

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British Airways announced the suspension of its daily service between London Heathrow and Kuwait, until further notice, from March 19, following Foreign and Commonwealth Office travel advice. In addition, only one flight a day is being operated to Tel Aviv instead of the usual twice daily schedule.


British Airways re-launched its Executive Club loyalty programme to make the scheme simpler, with more ways to spend BA Miles and better incentives for loyal customers to take effect from July 1, 2003.


Easyjet notified British Airways that it will not exercise the option to buy its German subsidiary, dba (formally Deutsche BA). EasyJet has paid the airline £6.1 million during the purchase option period. The company will continue to work towards the long term future of dba and it remains business as usual for customers and staff. British Airways will continue to develop dba as a no-frills carrier.


British Airways and SN Brussels Airlines received approval from the European Commission to continue their commercial relationship agreed in July 2002. It enables the two airlines to codeshare on selected flights and offer reciprocal frequent flyer benefits for customers. To date, the airlines now codeshare on six routes in Europe. SN Brussels puts its code on British Airways operated services between London Heathrow, London Gatwick, Southampton and Brussels. At the same time, British Airways applies its code to SN Brussels operated services between Birmingham, Newcastle, Bristol and Brussels.

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