BA profits dive

British Airways today reported a 40% fall in third-quarter profits, but said the number of passengers carried last month lifted by 4.3%.

BA said pre-tax profits in the three months to December 31 fell to £75m (€108.7m) from £125m (€181.3m) a year ago. The figure lifted BA’s nine-monthly profits to £410m (€594.5m) against £185m (€268.3m) last time.

It said the number of total passengers carried in January increased to just over 2.6 million from 2.5 million in the same month last year.

Chief executive Rod Eddington described the quarterly results as “respectable” against a background of a 47.3%, or £106m (€153.7m), rise in fuel costs.

“Our focus remains on reducing controllable costs and debt while continuing to invest in our products,” he said.

BA has been tussling with soaring fuel costs, higher wage awards and increased pension contributions, among other issues.

It has identified employee costs as an area of concern after pay deals and higher pension payments offset the progress achieved by 13,000 job cuts.

In December, it said its UK airports director had left the group, four months after a serious shortage of check-in staff led to thousands of passengers being stranded by cancellations and delays at Heathrow, which is believed to have cost BA £5m (€7.2m).

Today, BA said progress on delivering the planned £450m (€652.6m) savings that it announced in its 2003/05 business plan remained on track for completion by March.

It said the £300m (€435m) of staff cost savings announced in the 2004/06 business plan had been delayed by the extended pay talks. The successful conclusion of talks with most employee groups had resulted in agreements lasting until October 2006.

“The focus for the remaining two years of the agreement will be to implement working practice changes to deliver £300m (€435m) of employee cost savings,” BA said.

Chairman Martin Broughton said market conditions for the current financial year remained broadly unchanged.

For the year to March, the total revenue outlook was slightly better than previous guidance, with a 3%-3.5% improvement expected.

Fuel costs net of savings from advance buying were still expected to be about £245m (€355m) more than last year, although passenger and cargo fuel surcharges partially offset this increase.

Operating spending in the quarter increased by 6.3%, primarily due to the 47.3% increase in fuel costs and a 3.2% rise in employee costs.

BA said its Asia Pacific and Africa and Middle East routes showed the biggest improvement in passenger numbers.

Traffic on flights to Asia moved up 9.7% to 147,000 while passenger numbers on Africa and Middle East flights increased by 9.5% to 299,000.

Figures for flights to the Americas lifted 6.5% to 577,000 while numbers of passengers on services in the fiercely competitive UK and European market rose by 2.2% to just under 1.6 million.

Traffic measured in revenue passenger kilometres was higher by 8.1%, resulting in a passenger load factor – how full its planes were – up 3.2 points against last year.

BA said it planned to fly five flights a week this summer to Shanghai in China from Heathrow, subject to approval by the Chinese authorities.

The airline currently flies from Heathrow to Beijing four times a week, which will increase to six times weekly from June. Flights to Hong Kong will rise to 21 flights a week from June, against 17 flights currently.

BA added that it had decided to suspend flights between Heathrow and Jeddah and Riyadh in Saudi Arabia from March 27 due to reduced passenger demand.