British Airways Slumps To Record Annual Loss
British Airways slumped to a record loss, nearly doubled its debt pile and abandoned its dividend, adding the tough conditions made it impossible to give any guidance for the current period.
Europe's third-biggest airline by revenue posted operating losses of GBP220 million pounds (USD$347.5 million) on Friday, compared to a profit of GBP875 million in 2007/08.
It had earlier in the year forecast a loss of GBP150 million, not including restructuring costs of around GBP80 million as the company slashes its workforce.
BA scrapped its dividend, just a year after it was reinstated with much fanfare for the first time since 2001.
"The revenue outlook continues to be weak during the current financial year... In light of this, the board is unable to recommend a dividend this year," Chairman Martin Broughton said in a statement.
The company added that there would be no guidance for the current year due to difficulty forecasting sales.
"This is sobering stuff after an extraordinarily difficult year. They are being very downbeat on the current year," Blue Oar airlines analyst Douglas McNeill said.
He added that on a positive note the airline would get a boost from a GBP400 million cheaper fuel bill in 2009/10. The airline reported a full-year fuel bill this time around close to GBP3 billion, up 44.5 percent from the previous year.
BA has suffered over the past year as its core business travel passengers between London and New York cut down on air travel due to the economic downturn.
Air France-KLM showed a glimmer of hope for the battered industry earlier this week when it posted a narrower than expected operating loss.
TALKS CONTINUE
BA chief executive Willie Walsh said there was nothing to report on long-running merger discussions with Spanish partner Iberia.
"Discussions continue -- the main issue remains corporate governance," he told reporters, referring to the make-up of the umbrella company that would control the combined group.
BA and Iberia expect a ruling on their plans for an anti-trust transatlantic alliance with American Airlines by October. The move would follow the recent profit-sharing venture between Air France-KLM and Delta.
BA said it would continue cost-cutting, having reduced head count by 2,500 in the past year, while capacity for next winter will be cut by 4 percent.
The British carrier's debt rose to GBP2.4 billion, from GBP1.3 billion the previous year, while its cash position slid GBP483 million to just under GBP1.4 billion.
PENSION DEFICIT
Analysts and shareholders have been concerned about the group's pension deficit, which was valued at GBP1.5 billion at March last year but is likely to have grown substantially since then.
"If the financial markets deteriorate further, our pension deficit may increase, impacting balance sheet liabilities, which may in turn affect our ability to raise additional funds," the airline said in the statement.
A full actuarial review of the retirement scheme is currently underway, with the results expected to be published in late summer. The group will not comment further until then.
