BA announces £160m losses

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The Independent Online

British Airways today showed the impact of the September 11 terrorist attacks by unveiling pre–tax losses for the third quarter of £160 million.

However, the figures from BA were better than expected, with operating losses for the period coming in at £187 million against the £225 million that many City experts had been predicting.

Chief executive Rod Eddington said: "We have made real progress in managing our costs but British Airways still faces a number of considerable challenges some of which were apparent before the terrorist attacks on the USA."

He added those challenges would be addressed in the company's forthcoming future size and shape review, which is due to be unveiled next week.

BA is thought to be preparing for further extensive job cuts and will also reduce its in-flight service on short-haul flights to compete with low-cost rivals such as easyJet and Ryanair.

Reports suggest BA's payroll would shrink by 16,000 over five years, from the start of the current financial year.

Today's pre-tax loss for the three months to December 31 compares with a profit of £65 million a year earlier. The operating profit last time was £80 million.

Pre-tax losses for the first nine months of BA's financial year are now running at £115 million, compared with a profit of £215 million a year earlier.

Mr Eddington added: "These results reflect the massive impact on revenues of September 11 and the ongoing economic slowdown."

BA said its total costs fell by 8.5 per cent during the three­month period, reflecting "swift actions" taken after the September 11 attacks.

Since the atrocities it has announced plans to slash 5,200 jobs – on top of the 1,800 announced earlier in the year.

Services have also been scaled back, demonstrated today by passenger capacity – a measure of the number of available seats – falling by 16.3 per cent over the three­month period.

Traffic volumes, which show the actual number of passengers carried relative to the distance flown, declined by 20.3 per cent, BA added.

Turnover also fell 19.9 per cent to £1.84 billion, although chairman Lord Marshall said there were signs that the position was improving.

He added: "The general economic weakness in many of our key markets is expected to continue, however, the initial uncertainty and concern caused by the events of September 11 have diminished and as a consequence there is an improving revenue trend."

Mr Eddington later told BBC Radio 4's Today programme: "Clearly we've got some work to do, and there's a major piece of work on future size and shape which is on track and will be announced later this month, so we'll be able to go into the detail of that then."

Asked whether that would mean a "slimmer" shape, Mr Eddington said: "Yes – we've got to take costs out of our business.

"There's clearly speculation about what the impact of future size and shape is going to be on the numbers of people who work for us, and that's something that's being addressed."

Mr Eddington said he did not want to talk about whether that would mean job cuts, which some reports claimed could be up to 10,000.

But he added: "We are going to have to take some more jobs (on top of 7,000 already announced) out of our business, that's right."

Airlines, including BA, had to "rethink" short­haul routes to compete with no­frills rivals.

BA's shares were up 1 per cent – 2.5p to 215p – in the opening minutes of trading on the London market.

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