BA expects a boost from higher earnings
Sunday 09 August 1998
Analysts are predicting first-quarter pre-tax earnings will climb to between pounds 130m and pounds 150m from pounds 90m last year. That will come as welcome news to holders of the stock, which has dropped 20 per cent in the past month on increasing worries over Asia and slowing growth in the US. "If there is a full-blown global recession then we will have to make all airlines a sell," said Mike Powell, analyst with SG Securities.
BA shares rose slightly on Friday in anticipation of the results to close up 21.5 pence at 591p. The share price was also boosted by comments last week by Peter Mandelson, the Secretary of State for Trade and Industry, that he would follow in the European Commission's footsteps and approve the airline's link-up with American Airlines. "When the BA/AA alliance is finally approved, I think the real value will show through," said Chris Tarry, transport analyst with Dresdner Kleinwort Benson.
The progress of the alliance, which after two years of being announced still needs US approval, has also been hurried along by the resumption of talks between the British and American governments about lifting restrictions on flights between the two countries. The talks are due to resume in London on 5 October. Such an "open skies" treaty would open up London's Heathrow airport to more US carriers.
But there is many a slip 'twixt cup and lip, and a fresh row is brewing between Westminster and Brussels over whether BA should be allowed to sell the 267 slots that Brussels wants it to give up as a condition of approval for the alliance.
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