BA soars as traffic numbers rebound after terror attacks

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British Airways gave the aviation industry a much-needed boost yesterday as new traffic figures from the flag carrier showed that passenger numbers are recovering more quickly than expected from the 11 September terrorist attacks.

Traffic levels on BA were down by 10.4 per cent in December compared with a fall of almost 18 per cent in November. BA also said that revenues last month, while lower than a year ago, were above its initial expectations.

Meanwhile, the low-cost airline Go Fly reported a sharp rise in December traffic, with passenger numbers up by 57.3 per cent on the same month last year. Go also said that load factors – the percentage of seats filled on each flight – was up marginally last month, at 70.5 per cent.

Shares in BA climbed by 13 per cent as the City reacted to BA's figures and to better-than-expected passenger numbers from its Dutch counterpart KLM. Since the beginning of the year, BA shares have risen by 24 per cent. Despite the improvement in traffic levels, BA cautioned that market conditions continued to be difficult and admitted that much of the recovery in traffic levels had been due to price discounting, particularly on economy fares.

Chris Tarry, transport analyst at Commerzbank, said that BA's revenues for the third quarter were likely to be about £500m lower than the September-December period in 2000. "The airlines have succeeded in bringing back passengers by setting fares at a market clearing price but what they really need to do is turn that traffic into profitable business," he added.

BA's figures also showed that the recovery in traffic levels is much more pronounced among economy passengers than first and business class passengers. Premium traffic levels were down by 18.3 per cent last month compared with 24.8 per cent in November. But non-premium traffic now stands just 9.2 per cent lower than a year ago. In November it was down by 16.3 per cent.

In the immediate aftermath of the terrorist attacks, BA traffic levels were down by 30 per cent, with passenger numbers on its all-important transatlantic routes down by 36 per cent. In December, transatlantic traffic was still down but by a much smaller 12.9 per cent.

Despite the decline in passenger numbers – down 8.5 per cent in December to 2.7 million – BA said that its load factor was up by 1.5 percentage points to 68.6 per cent. This follows BA's decision in the immediate aftermath of 11 September to reduce capacity by 20 per cent – a move which has led to 7,000 job losses across the airline.

BA's own house brokers, Merrill Lynch, are forecasting that the airline will make a bottom line loss for the year of £775m. BA said losses would be partly offset by an £85m accounting credit due to the fall in the value of the yen which has reduced the cost of servicing the carrier's Japanese denominated debt.

Separately, the airports group BAA called on the industry regulator, the Civil Aviation Authority, to allow it to raise prices at Heathrow earlier than planned to help fund the cost of Terminal Five. The controversial project was given the go-ahead last month by the Secretary of State for Transport Stephen Byers, although it is not due to open until 2007.