BA warns of job cuts as profits dive by 80%

BRITISH AIRWAYS yesterday warned of job cuts and refused to rule out the possibility of falling into loss this year for the first time since privatisation 12 years ago.

The warning came as BA reported an 80 per cent slump in profits for the three months from April to June and confirmed plans to cut capacity by 12 per cent - the equivalent of 6.5 million seats - over the next three years.

Bob Ayling, BA's chief executive, would not be drawn on how badly the airline's 65,000-strong workforce would be hit. But he said: "In the past, BA has generated significant numbers of jobs. That will stop."

Although there would be no reduction in front-line staff such as pilots, cabin crew and ground handling, Mr Ayling said there would be cutbacks in support jobs as BA introduced more automation and outsourced functions such as accounting to overseas locations.

The cutback in capacity will be achieved by introducing smaller planes, reducing frequencies on some routes and scrapping other routes altogether, such as Jakarta and Pittsburgh.

BA also disclosed that it has reached its goal of achieving savings of pounds 1bn a year and was targeting a further pounds 200m of efficiency gains by the end of the current financial year.

Lord Marshall, the BA chairman, blamed the slump in underlying pre-tax profits for the quarter - from pounds 139m to pounds 23m - on excess capacity on North Atlantic routes, subdued economic activity in Europe and the lack of any convincing recovery in the Far East. Added to this, BA had been hit by the strength of sterling and the growth of low-cost carriers.

He went on to warn that the second quarter - traditionally the most profitable part of the year for BA - would be "significantly affected" by excess capacity, making it difficult to forecast results for the year with any certainty.

In the past three months, United Airlines has increased its capacity on the North Atlantic by 20 per cent and American Airlines by 8 per cent. Air France, Alitalia and Lufthansa have also added more seats, resulting in a price war. Last week the Dutch carrier KLM was offering return flights to New York for as little as pounds 150.

Chris Tarry, aerospace analyst at Commerzbank, is forecasting underlying pre-tax losses of pounds 7m for the full year. "BA's strategy is brave, coherent and deliverable and we are beginning to see the benefits coming through. What we are watching for now is what the other airlines will do about reducing their capacity."

BA has already begun replacing its Boeing 747 aircraft with 777 jets. By 2002, half the BA long-haul fleet will be 777s which have fewer economy seats but the same number of first and business class seats as the 747.

It plans to replace its fleet of Boeing 757s with smaller Airbus A318 or Boeing 717 jets to improve the economics of its short-haul European network.

Yields fell 5.8 per cent during the April-June period while the load factor dropped by nearly two points to 65.5 per cent. Including gains on disposals, such as the sale of BA's stake in the Galileo ticket reservations system, pre-tax profits climbed 38 per cent to pounds 200m. Operating profit fell from pounds 173m to pounds 94m. Fuel costs were pounds 7m lower at pounds 173m but will be up sharply this quarter because of the surge in oil prices.

Outlook, page 13

Start your day with The Independent, sign up for daily news emails
Life and Style
tech
Arts and Entertainment
Rocky road: Dwayne Johnson and Carla Gugino play an estranged husband and wife in 'San Andreas'
filmReview: In the face of all-round devastation, even Dwayne 'The Rock' Johnson appears a little puny
News
i100
Arts and Entertainment
Bright lights, big city: Melrose Avenue in Los Angeles by dusk
books
Sport
Harry Kane makes Paul Scholes' Premier League team of the season
footballPaul Scholes on the best players, managers and goals of the season - and the biggest disappointments
News
i100
News
ebookA unique anthology of reporting and analysis of a crucial period of history
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

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Day In a Page

Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

The 161-page dossier that exposes Fifa's dark heart

How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

Exclusive interview with Tripoli PM Khalifa al-Ghweil

'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

Raymond Chandler's Los Angeles

How the author foretold the Californian water crisis
Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

Art attack

Chinese artist who posted funny image of President Xi Jinping facing five years in prison
Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

Cher is the new face of Marc Jacobs

Alexander Fury explains why designers are turning to august stars to front their lines
Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

'I'm climbing Ben Nevis for my daughter'

Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
10 best wedding gift ideas

It's that time of year again... 10 best wedding gift ideas

Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
Paul Scholes column: With the Premier League over for another year, here are my end of season awards

Paul Scholes column

With the Premier League over for another year, here are my end of season awards
Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

Liverpool have seen too much tragedy to forget Heysel

Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club dealt with this tragedy
Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

Khan’s audition for Mayweather may turn into a no-win situation

The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

How Stephen Mangan got his range

Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor