British Airways today announced a pre-tax profit of £220 million (2003: £105 million) for the three months ended September 30, 2004. The three-month pre-tax figures took the result for the half-year to £335 million profit (2003: £60 million). Operating profit for the quarter was £240 million (2003: £195 million). The operating margin was 11.8 per cent. Yields in the second quarter were down 5.1 per cent (2003: 5.9 per cent down). The operating profit for the half-year was £390 million (2003: £235 million). There will be no interim dividend.

Rod Eddington, British Airways’ chief executive, said: “We are making steady progress in building a more robust airline. Unit costs continue to improve and our debt is at its lowest level since 1993. Rising fuel costs, however, are expected to continue and remain a challenge along with employee costs.

“We continue to invest in our product and have welcomed the first A321 aircraft into our fleet. We will have five more by the end of December.

“To make the travel experience quicker and easier we have added more features to our ba.com website. It has become so popular that a quarter of all our customers now visit ba.com before they fly. Booked revenue on ba.com has risen by 42 per cent since last year.

“Online printed flight boarding cards are now accepted at 31 airports in the UK and Europe. We have also introduced upselling which enables customers to upgrade their travel package online and see what they are paying for. They will also, by Christmas, be able to change or refund their bookings online.”

Martin Broughton, British Airways’ chairman, said: “Market conditions have remained broadly unchanged since our last report. All market segments remain price sensitive and yield declines are expected to continue. The total revenue outlook for the year to March 2005 is unchanged with a 2-3 per cent improvement driven by volume increases.

“Fuel costs net of hedging are now expected to be some £245 million more than last year (up £20 million from our last estimate). Passenger and cargo fuel surcharges forecast at £160 million for this year partially offset this increase. Consequently, our focus will remain on reducing both controllable costs and debt.”

Group turnover for the second quarter was £2,026 million (2003: £1,983 million), 2.2 per cent up on a flying programme 3.1 per cent up, measured in available tonne kilometres (ATKs). Traffic volumes, measured in revenue passenger kilometres (RPKs), were up 4.4 per cent. Seat factor was up 2.0 points at 78.5 per cent on capacity 1.8 per cent higher in available seat kilometres (ASKs).

Operating cashflow for the six months was £598 million (2003: £520 million). After disposal proceeds, capital expenditure and interest, cash inflow was £868 million (2003: £367 million). Net debt was £3,286 million, down by £872 million since the start of the year, its lowest level since 1993.

Unit costs improved by 6.1 per cent on the same period last year. This reflects a net cost reduction of 3.2 per cent on capacity 3.1 per cent higher in ATKs.

Fuel costs increased by 12.4 per cent (2003: up 21.1 per cent) and employee costs increased by 7.7 per cent (2003: up 1.0 per cent) as wage awards and increased pension contributions were only partially offset by manpower reductions. All other categories of operating costs were down, with selling costs, in particular, down 17.6 per cent (2003: down 22.3 per cent).
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