British Airways has warned of widening losses as the downturn, weakness of sterling and high fuel prices erode its cash-cow premium market.

The UK flag-carrier saw pre-tax losses slump to £70m for the nine months to 31 December 2008, down from a £816m profit for the same period the year before.
BA chief executive, Willie Walsh, also confirmed a pay freeze for all its 43,000 staff, as he begins fraught talks with trade unions.

The company also said it is seeking changes in working practices in a bid to increase workforce productivity. A BA spokesperson said: “We cannot envisage making an increase in base pay and the unions understand the difficulties that we face in the economy.”

BA’s slide continued into January. Premium traffic, the carrier’s key profit driver, was worst hit, falling 13.7% in the month, whilst overall traffic fell by 1.3%. However the company was able to report a 6% rise in revenue to £7bn as currencies worked in its favour for income.

“We have already taken several actions to offset the unprecedented economic conditions,” Mr Walsh said.

“We have increased our sales activity in markets with stronger foreign currencies to benefit from exchange and continue to offer competitive fares in both premium and non-premium cabins.”

Mr Walsh said the industry continues to suffer “very difficult trading conditions” as the recession deepens, but the fall in the price of oil should benefit the company’s costs.

BA confirmed that it is on target for an operating loss of £150m in the full financial year to 31 March. Non-fuel costs are set to increase by a higher-than-expected 8% due to severance costs and the weak pound.

BA axed 450 managers in the run-up to Christmas as part of a restructuring programme that had now moved to pay and productivity talks with union leaders.
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