BA shrugs off problems with earnings jump

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The Independent Online

British Airways has brushed aside a record fuel bill and a brewing revolt among its pilots to report a 35 per cent jump in profits to £788m for the first nine months of its financial year.

The healthy figures were not enough, however, to prevent an investor sell-off yesterday over worries that the carrier is headed for turbulence amid darkening economic clouds, the weak dollar and falling demand on its short-haul routes. The company's shares lost 4.2 per cent on the day to close at 318p.

Chief executive Willie Walsh tried to calm investor jitters, arguing that the long-haul business-class and first-class traffic, which makes up the lion's share of the carrier's profits, is "more resilient through economic cycles than people may believe."

BA's fuel bill will be £100m more that than it was in 2006, which will push it to more than £2bn for the year. The company admitted it will be more difficult to counteract the rising cost with cutbacks elsewhere in the business. "This year's increase will be offset by reductions in other operating costs but our ability to mitigate rising fuel costs next year will be challenging."

Mr Walsh denied the company was signalling that it was preparing to push through its 12th fuel surcharge to customers. "We look at that on an ongoing basis. After the last adjustment in November we have no plans to adjust it further at this point," he said.

Negotiations, meanwhile, continue with pilots over BA's new subsidiary, called OpenSkies, which will fly between Europe and New York from later this year. The pilots union will vote this month on whether to strike over the plan to employ pilots under the subsidiary rather than the mother company, with potentially different terms.

Mr Walsh said the threatened strike "won't derail the plan – what we need to do is reassure the pilots that this new airline will in no way effect or threaten the terms and conditions under which they operate for us within BA."

The company also fired a shot across the bows of start-up business class-only carriers such as Silverjet and Eos Airlines yesterday by unveiling plans to begin a twice-daily, business class-only service from London's City airport to New York next year.

BA has ordered two A318 planes for the service, which will have to stop in Ireland to refuelbecause the runway at London City airport is too short to allow the planes to take off with full fuel tanks.

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