British Airways today posted a pre-tax loss of £45 million (2002: £65 million profit) for the first quarter to June 30, 2003. The operating profit for the first quarter was £40 million (2002: £158 million profit).

The deterioration in operating profit reflects the significant reduction in revenue due to continuing economic weakness, the war in Iraq and the impact of SARS. This was partially offset by cost savings delivered through the airline’s Future Size and Shape recovery programme.

Passenger capacity, measured in available seat kilometres (ASKs), reduced by 0.2 per cent for the quarter. Revenue passenger kilometres (RPKs) were up 1.7 per cent for the quarter. Yield measured as pence per RPK deteriorated by 12.7 per cent. Seat factor was up 1.3 points at 71.8 per cent in the quarter.

Net debt was £4,923 million, down £226 million since the start of the financial year and£1.6 billion from the December 2001 peak.

Net costs were down 5.4 per cent for the quarter at £1,649 million, and unit costs improved by 4.5 per cent in the same period. Revenue in the quarter, at £1,832 million, was down 10.7 per cent.

Reductions were achieved in most areas of operating cost; aircraft operating lease costs, selling and distribution costs, landing fees, en route charges and engineering costs. Employee and handling costs were flat. Fuel costs increased by 7 per cent to £229 million.

Rod Eddington, British Airways’ Chief Executive, said: “This is the most testing period in aviation history. It continues to be an extremely challenging revenue environment due to the effect of SARS, the war in Iraq plus the ongoing economic weakness. Future Size and Shape cost efficiencies have partially offset the weak revenue in the first quarter.

“We must continue to modernise our business.

“The direct cost of the unofficial industrial disruption in July will be in the range of £30 million to £40 million reflecting costs incurred and lost revenue. The uncertainty has also impacted forward bookings and will reduce revenue.

“We will work hard to restore British Airways’ reputation with our customers.”

Lord Marshall, British Airways’ Chairman, said: “The demand for air travel, while improving, remains unpredictable. Seat factors are expected to continue at close to last year’s levels but yield improvements will be difficult to achieve. We expect that revenue in our second quarter will be lower than last year.

“The implementation of our Future Size and Shape programme and other cost initiatives continues to deliver larger than expected cost savings.”

——-