British Airways Heads For Record Quarterly Loss
February 6, 2009
British Airways is set to post a record loss for its fourth quarter as it continues to battle falling demand and weak sterling, but its shares rose as analysts said the carrier should survive the economic downturn.
The airline said on Friday it had made an operating profit of GBP89 million pounds (USD$130.2 million) for the first nine months of the year, sharply down from GBP744 million a year ago.
It said in a profit warning last month that it would post a full year operating loss of GBP150 million, meaning the three months to end March would see it drop nearly GBP240 million into the red.
"The bleak operating environment will likely make Q4 a record loss," UBS analyst Tim Marshall said in a note, while two other analysts said they estimated the loss would break new ground.
"BA is really feeling it, but the equity markets look forward. Is BA going to get to the other side in one piece? The answer is looking like yes," Evolution analyst Nick Cunningham said.
BA chief executive Willie Walsh said he was not expecting the economic backdrop to improve in the short term.
"The trading environment is very tough -- external circumstances will determine what happens, (but) we are planning on not seeing any major improvement for the next 24 months," Walsh told reporters.
He added that the group's cost base was under review, and that certain jobs might be cut despite the departure of nearly 500 managers on a voluntary redundancy basis late last year.
"We are continuing to look at the numbers of people employed -- it is regular activity," Walsh said.
The news comes against a backdrop of contrasting fortunes for European airlines.
Rival Air France-KLM issued a profit warning last month, but the last of the big three full-service European carriers, Lufthansa, surprised the market earlier in the week by raising its 2008 profit forecast.
Low-cost carriers easyJet and Ryanair have also raised recent forecasts, saying travelers are trading downwards during the recession.
IBERIA TALKS PROGRESS
BA is still in merger talks with Spanish partner Iberia more than six months after discussions were announced, and Walsh said he shared recent optimism from Iberia Chairman Fernando Conte that a deal could be struck.
"I share his optimism. We have made very good progress, and we expect that progress to continue," he said, without giving a timescale for when a deal could be announced.
BA also said on Friday its passenger numbers fell 1.3 percent year-on-year, while its load factor was up 1 percent at 73.2 percent.
However, premium or first and business class traffic fell 13.7 percent year on year.
BA's yield -- the average revenue per passenger carried and kilometer flown -- rose 9.6 percent to 6.95 pence.
