BA reports surprise quarterly profit

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The Independent Online

British Airways surprised the City with third-quarter operating profits of £25m yesterday, but warned that it is still on course for a full-year loss.

Analysts predicted losses of up to £100m in the three months to December, but stiff cost-cutting measures helped drag the airline back into the black for the first time for more than a year. Nonetheless, the nine-month period still saw an operating loss of £86m, compared with profits of £89m in the same period of 2008. Revenues were down by 12.9 per cent at £6.14bn.

The improved performance vindicates BA's aggressive cost-cutting measures, and reinforces the need for further re-structuring plans, according to Willie Walsh, the chief executive. "The performance clearly demonstrates that the actions we have taken and are taking are proving to be correct," Mr Walsh said. "But we are not getting carried away because it is difficult out there."

The third-quarter results come as BA's cabin crews are voting for a second time on whether to strike over plans to change working conditions. The first ballot – which was passed by a massive nine-to-one majority and nearly led to 12 days of stoppage over Christmas – was judged illegal because it included votes from staff who subsequently took voluntary redundancy. If the current vote is passed, industrial action could start from 1 March.

BA has cut costs by 10.5 per cent in the last nine months. In the most recent quarter, which saw revenues drop by 11 per cent, costs came down by 14 per cent, or £330m, according to the airline. Of that, £165m is due to the fall in fuel prices. But about £17m is from staffing changes, including the changes in cabin crew arrangements currently being contested by Unite in the High Court this week, and also a voluntary redundancy programme.

Mr Walsh dismisses the suggestion that BA's improved performance might strengthen the hand of trade unions arguing against cuts. "If anything, these results reinforce the message that had we not taken action, this is business that would be losing a fortune," he said. "The good news is that the changes we are making are proving to be the right ones, but regrettably we will still report a pre-tax loss for the year."