BA profits slide as fuel costs rise

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The Independent Online

British Airways today reported a 40 per cent fall in third-quarter profits, but said the number of passengers carried last month lifted by 4.3 per cent.

BA said pre-tax profits in the three months to December 31 fell to £75 million from £125 million a year ago. The figure lifted BA's nine-monthly profits to £410 million against £185 million last time.

It said the number of total passengers carried in January increased to just over 2.6 million from 2.5 million in the same month last year.

Chief executive Rod Eddington described the quarterly results as "respectable" against a background of a 47.3 per cent, or £106 million, rise in fuel costs.

"Our focus remains on reducing controllable costs and debt while continuing to invest in our products," he said.

BA has been tussling with soaring fuel costs, higher wage awards and increased pension contributions, among other issues.

It has identified employee costs as an area of concern after pay deals and higher pension payments offset the progress achieved by 13,000 job cuts.

In December, it said its UK airports director had left the group, four months after a serious shortage of check-in staff led to thousands of passengers being stranded by cancellations and delays at Heathrow, which is believed to have cost BA £5 million.

Today, BA said progress on delivering the planned £450 million savings that it announced in its 2003/05 business plan remained on track for completion by March.

It said the £300 million of staff cost savings announced in the 2004/06 business plan had been delayed by the extended pay talks. The successful conclusion of talks with most employee groups had resulted in agreements lasting until October 2006.

"The focus for the remaining two years of the agreement will be to implement working practice changes to deliver £300 million of employee cost savings," BA said.

Chairman Martin Broughton said market conditions for the current financial year remained broadly unchanged.

For the year to March, the total revenue outlook was slightly better than previous guidance, with a 3 per cent-3.5 per cent improvement expected.

Fuel costs net of savings from advance buying were still expected to be about £245 million more than last year, although passenger and cargo fuel surcharges partially offset this increase.

Operating spending in the quarter increased by 6.3 per cent, primarily due to the 47.3 per cent increase in fuel costs and a 3.2 per cent rise in employee costs.