Rise in business trips and victory in expenses row will see BA break even

BRITISH Airways said it will break even this year, rebounding from a record loss, if demand for business trips continues to gain and chief executive Willie Walsh wins his 15-month tussle over cabin-crew expenses.

A return to profit “requires permanent change across the company”, Mr Walsh said after the London-based company’s net loss widened to £425 million (€498m) in the year ended March 31 from £358m a year earlier.

Mr Walsh said he aims to resume negotiations with the Unite union today to head off three weeks of strikes by 12,000 flights attendants starting on May 24.

While volcanic ash from Iceland is also weighing on earnings, a rebound in demand and cost savings that totalled £1 billion last year should help eliminate losses in fiscal 2011, he told reporters.

“To break even on top of the volcanic ash and the strikes that they must know are going to happen is pretty upbeat,” said Douglas McNeill, an analyst at Charles Stanley in London.

“BA has done well on cost control; they’ve taken out a huge amount.”

While sales slumped 11% last year to £7.99bn, fuel costs dropped £597m, and the company cut other expenses by £397m as it reduced capacity and renegotiated contracts with pilots and ground staff. The net loss was lower than the £470m expected by analysts. Corporate bookings are now increasing in the key trans-atlantic market.

Premium passengers make up 13% of the total but contribute 45% of revenue, Mr Walsh said on a conference call. “The cost base has improved and we’re seeing some signs of market conditions improving,” he said.

“It’s that combination which leads us to target break-even.”