Ayling declares BA has turned the corner despite 80% profits slump

BRITISH AIRWAYS declared yesterday that it had started to turn the corner despite reporting a drop of more than 80 per cent in profits for the second quarter - traditionally its most profitable period of the year.

Announcing an unchanged dividend, Bob Ayling, the airline's beleaguered chief executive, said: "We feel things are beginning to turn around. Of course, these results are bad but they are not as bad as people were expecting. I don't think there is anybody who follows this industry seriously who doesn't support or strongly support what we are doing."

Analysts are forecasting losses of pounds 160m to pounds 200m for the full year - BA's first loss since privatisation in 1987. But Mr Ayling said its strategy of cutting capacity and concentrating on business class passengers was starting to pay off. "Everyone is paid by results and these results are encouraging," he added.

He was speaking as BA unveiled an 83 per cent decline in pre-tax profits from pounds 240m to pounds 40m for the July to September period but reassured investors by maintaining the interim dividend at 5.1p.

BA said that the "glut of low fares" which had affected it so severely during the summer would continue to hit profitability over the winter months.

But the BA chairman, Lord Marshall, said the prospects for next summer gave it grounds for "cautious optimism". Other airlines were now following the lead of BA and cutting back on capacity growth, while the UK economy was strengthening and South-East Asia was improving fast.

In a message aimed as much at BA's 65,000 staff, Mr Ayling said that the target of pounds 1bn of cost savings had now been achieved under the airline's business efficiency plan and employees could look forward to an era of investment. "From now on we will be investing in products, in people and in our customers," Mr Ayling added.

While 1,000 management and back-office jobs have gone since August as part of a further pounds 225m cost-cutting plan, there will be be no reduction in front-line staff.

Although a number of analysts had pencilled in a dividend cut, Mr Ayling said there had been no serious discussion about reducing the payout based on current trading and BA's confidence in the outlook.

Brokers are now forecasting a bottom-line loss of pounds 160m to pounds 180m for the year and losses at the operating level of about pounds 230m for the second half.

But Chris Tarry of Commerzbank, a bull of the stock, said: "Step by step, people are becoming clearer about BA's strategy, how it will be delivered and what that means. The salesforce now have a product and the confidence to sell it."

Both the second quarter and interim figures were distorted by a series of one-off items. On a pre-tax basis, BA made a profit of pounds 240m for the half year, compared with pounds 385m last year, but pounds 191m of this was due to the disposal of its stake in the Galileo ticket reservations system and aircraft sales.

Stripping out pounds 42m of redundancy costs, a pounds 62m charge for re-translation of yen-denominated borrowings and a pounds 14m profit on asset disposals, Mr Ayling said that underlying profits in the second quarter were pounds 132m - down by a more modest 46 per cent on the previous year.

Mr Ayling said that BA would use British Midland's entry into the Lufthansa- led Star Alliance to argue for a level playing field if and when it resubmits its alliance with American Airlines for approval.

The sale of a 20 per cent stake in British Midland to Lufthansa for around pounds 110m is being announced this morning.

Alexis Sanchez has completed a £35m move to Arsenal, the club have confirmed
sportGunners complete £35m signing of Barcelona forward
Poor teachers should be fearful of not getting pay rises or losing their job if they fail to perform, Steve Fairclough, headteacher of Abbotsholme School, suggested
voicesChris Sloggett explains why it has become an impossible career path
world cup 2014
Popes current and former won't be watching the football together
Arts and Entertainment
Celebrated children’s author Allan Ahlberg, best known for Each Peach Pear Plum
Wayne’s estate faces a claim for alleged copyright breaches
newsJohn Wayne's heirs duke it out with university over use of the late film star's nickname
Life and Style
It beggars belief: the homeless and hungry are weary, tortured, ghosts of people – with bodies contorted by imperceptible pain
lifeRough sleepers exist in every city. Hear the stories of those whose luck has run out
peopleIndian actress known as the 'Grand Old Lady of Bollywood' was 102
Arts and Entertainment
In a minor key: Keira Knightley in the lightweight 'Begin Again'
Mick Jagger performing at Glastonbury
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
Currently there is nothing to prevent all-male or all-female couples from competing against mixed sex partners at any of the country’s ballroom dancing events
Potential ban on same-sex partners in ballroom dancing competitions amounts to 'illegal discrimination'
Germany's Andre Greipel crosses the finish line to win the sixth stage of the Tour de France cycling race over 194 kilometers (120.5 miles) with start in Arras and finish in Reims, France
tour de franceGerman champion achieves sixth Tour stage win in Reims
Life and Style
beautyBelgian fan lands L'Oreal campaign after being spotted at World Cup
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Business Analyst Consultant (Financial Services)

£60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

Systems Administrator - Linux / Unix / Windows / TCP/IP / SAN

£60000 per annum: Harrington Starr: A leading provider in investment managemen...

AVS, JVS Openlink Endur Developer

£600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...

Technical Support Analyst (C++, Windows, Linux, Perl, Graduate)

£30000 per annum: Harrington Starr: A global leader in trading platforms and e...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice
Hollywood targets Asian audiences as US films enjoy record-breaking run at Chinese box office

Hollywood targets Asian audiences

The world's second biggest movie market is fast becoming the Hollywood studios' most crucial