BA threatens to write off USAir stake: Regional airline will require provision if restructuring talks are not resolved

BRITISH AIRWAYS warned yesterday that it would write off its entire pounds 275.3m investment in USAir, if a dollars 1bn restructuring plan, including a dollars 500m programme of wage cuts and job losses, is not agreed between local unions and management within 90 days.

USAir, the loss-making regional airline whose pre-tax losses in 1994 are expected to top 1993's dollars 349.4m after reporting a first-quarter loss of dollars 196.7m, faces intense competition on its busiest routes in the North Eastern and mid-Atlantic states.

Sir Colin Marshall, BA chairman, said that if the talks between USAir management and unions were not satisfactorily concluded within the timescale USAir needed - which he thought was 90 days - a provision was likely.

But he said that even if the 'disaster scenario' of Chapter 11 bankruptcy overtook USAir, which paid pounds 18m in preference dividends to BA last year, he knew of no reason why BA should not continue to enjoy benefits from its link-up with the airline. These are estimated to be worth pounds 70m to BA in its current financial year.

A satisfactory cost-cutting agreement, boosted by a dollars 500m gain from a plan to improve aircraft utilisation at USAir, would allow BA to put in another dollars 450m to take its stake up to 40 per cent.

BA's warning on USAir came as it announced a 62.7 per cent increase in pre-tax profits to pounds 301m for the year to 31 March. The results, which compare with a loss of dollars 4bn by the world airline industry in 1993, were struck after a pounds 10m loss from the terrorist attacks on Heathrow airport in March.

The figures include a further quarter profit of pounds 55m against a loss of pounds 25m, reflecting strong growth in premium, passenger and cargo traffic. A final dividend of 7.92p makes a total of 11.10p, an increase of 9.3 per cent. BA shares closed 1.5p up at 379p.

Losses from TAT European Airlines in France and Deutsche BA offset BA's profits from its stake in Qantas, the Australian airline, and dividend income from USAir which meant losses from associated companies fell from pounds 11m to pounds 6m.

BA made a pounds 20m provision against advances to TAT to cover part of its losses. A restructuring plan by BA and TAT management will cut costs by 30 per cent this year and lead to a 'marked improvement', Robert Ayling, group managing director, said.

Mr Ayling said that, having reduced costs by the equivalent of pounds 580m a year in the past three years, a further pounds 150m of cost savings had been planned for the current financial year. This will include a 200 reduction in its 2,500-strong management payroll. Last year productivity rose by 8.2 per cent and unit costs rose by 1 per cent.

He said pounds 100m had been spent in the past 18 months on promoting BA's premium-priced services. The spending was reflected in a recovery in premium traffic which, having fallen by 4 per cent in the final quarter of 1993/4, rose by 14 per cent in the three months to March.

Passenger numbers increased by 8.9 per cent to 30.5m and BA's market share at Heathrow and Gatwick increased by 3 percentage points to 46 per cent. But excess capacity in the marketplace meant that revenues from each seat fell by 2.4 per cent in local currency although they rose by 3.1 per cent in sterling.

View from City Road, page 27

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Arts and Entertainment
The Apprentice candidates Roisin Hogan, Solomon Akhtar, Mark Wright, Bianca Miller, Daniel Lassman
tvReview: But which contestants got the boot?
Arts and Entertainment
Jim Carrey and Jeff Daniels ride again in Dumb and Dumber To
filmReview: Dumb And Dumber To was a really stupid idea
News
people

Jo from Northern Ireland was less than impressed by Russell Brand's attempt to stage a publicity stunt

Sport
Scunthorpe goalkeeper Sam Slocombe (left) is congratulated by winning penalty taker Miguel Llera (right)
football
Life and Style
A woman walks by a pandal art installation entitled 'Mars Mission' with the figure of an astronaut during the Durga Puja festival in Calcutta, India
techHow we’ll investigate the existence of, and maybe move in with, our alien neighbours
Arts and Entertainment
Sir Ian McKellen tempts the Cookie Monster
tvSir Ian McKellen joins the Cookie Monster for a lesson on temptation
News
i100
News
ebooksNow available in paperback
Travel
Tourists bask in the sun beneath the skyscrapers of Dubai
travelBritish embassy uses social media campaign to issue travel advice for festive holiday-makers in UAE
Arts and Entertainment
Jennifer Saunders stars as Miss Windsor, Dennis's hysterical French teacher
filmJennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress
Life and Style
tech
Sport
Nabil Bentaleb (centre) celebrates putting Tottenham ahead
footballTottenham 4 Newcastle 0: Spurs fans dreaming of Wembley final after dominant win
Life and Style
Sebastian Siemiatkowski is the 33-year-old co-founder and CEO of Klarna, which provides a simple way for people to buy things online
tech
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

Carlton Senior Appointments: Sr Wealth Manager - San Francisco - Inv AdvisoryFirm

$125 - $175 per annum: Carlton Senior Appointments: Senior Wealth Manager – In...

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Day In a Page

Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas
La Famille Bélier is being touted as this year's Amelie - so why are many in the deaf community outraged by it?

Deaf community outraged by La Famille Bélier

The new film tells the story of a deaf-mute farming family and is being touted as this year's Amelie
10 best high-end laptops

10 best high-end laptops

From lightweight and zippy devices to gaming beasts, we test the latest in top-spec portable computers
Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

Michael Carberry: ‘After such a tough time, I’m not sure I will stay in the game’

The batsman has grown disillusioned after England’s Ashes debacle and allegations linking him to the Pietersen affair
Susie Wolff: A driving force in battle for equality behind the wheel

Susie Wolff: A driving force in battle for equality behind the wheel

The Williams driver has had plenty of doubters, but hopes she will be judged by her ability in the cockpit
Adam Gemili interview: 'No abs Adam' plans to muscle in on Usain Bolt's turf

'No abs Adam' plans to muscle in on Usain Bolt's turf

After a year touched by tragedy, Adam Gemili wants to become the sixth Briton to run a sub-10sec 100m
Calls for a military mental health 'quality mark'

Homeless Veterans campaign

Expert calls for military mental health 'quality mark'
Racton Man: Analysis shows famous skeleton was a 6ft Bronze Age superman

Meet Racton Man

Analysis shows famous skeleton was a 6ft Bronze Age superman
Garden Bridge: St Paul’s adds to £175m project’s troubled waters

Garden Bridge

St Paul’s adds to £175m project’s troubled waters
Stuff your own Christmas mouse ornament: An evening class in taxidermy with a festive feel

Stuff your own Christmas mouse ornament

An evening class in taxidermy with a festive feel
Joint Enterprise: The legal doctrine which critics say has caused hundreds of miscarriages of justice

Joint Enterprise

The legal doctrine which critics say has caused hundreds of miscarriages of justice
Freud and Eros: Love, Lust and Longing at the Freud Museum: Objects of Desire

Freud and Eros

Love, Lust and Longing at the Freud Museum