BA soars back to profit after two years of losses

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The Independent Online

British Airways has bounced back into profit after two years of unprecedented losses thanks to the economic recovery and rising numbers of business and economy passengers.

Ahead of its imminent merger with Spain's Iberia, BA yesterday unveiled first-half revenues up by 8.4 per cent to £4.4bn and pre-tax profits of £158m, compared with £292m losses for the same period of 2009.

BA's chief executive, Willie Walsh, expects the recovery to continue, albeit slower in the fourth quarter as year-on-year comparators start to reflect the beginnings of the recovery at the end of 2009.

"The environment is much, much better than it was so there are significant improvements on last year," Mr Walsh said yesterday. "We still haven't recovered the position we were in at the peak in 2007-08, but we're heading in the right direction."

Mr Walsh is optimistic about the economic outlook. "I'm not seeing signs of a double-dip recession, either in BA's business or in the wider environment," he said. "The pace has slowed a little but we are still in positive territory and we need to stop talking the economy down and build on the improvements so far."

Alongside a recovery in passenger numbers, BA's first-half performance was buoyed by an end to recessionary discounting and a 1.5 per cent reduction in operating costs. While the group's fuel bill shot up by 2.4 per cent thanks to the rising oil price, BA has cut property costs and handling charges. Staff costs have also come down, thanks to new working practices introduced late last year and the subject of waves of cabin crew strikes this summer.

The most recent staff settlement is to be put to trade union Unite's 11,000 BA cabin crew members with the endorsement from Unite joint general secretary Tony Woodley that it is the best that can be done in the current climate.

Mr Walsh said: "We have negotiated with Unite over an extended period and got to a proposal that I believe represents the solution and hopefully will be recommended by the union to its members."

In contrast to strong words earlier this month claiming the long-running row was "entirely" the fault of Unite, Mr Walsh was keen to downplay the impact of the strikes yesterday. Altogether the 22 days of stoppages this year are estimated to have cost BA more than £150m, but BA has maintained yield and revenue growth at a similar level to its competitors, he said. "There has not been as much damage as expected or as the trade union might claim."

Mr Walsh yesterday added his voice to the chorus of criticism of the unpopular rise in Air Passenger Duty (APD) that comes into force on Monday. "Over a year, this will add £100m to our costs, and that is £100m that our customers will pay," he said.

As well as hitting family holiday plans, the APD is also in danger of slowing the pace of economic recovery by putting an extra burden on business. "The Government needs to assess the risk," Mr Walsh said. "The Treasury can identify the amount of revenue the tax is raising, but it needs to be very careful that is not outweighed by the damage to the economy."

BA categorically repudiates the environmental argument for the tax. Based on the current carbon price of slightly more than €15 (£13.07) per ton, BA's £340m annual APD bill more than doubly offsets the carbon footprint from its entire business, Mr Walsh said.

"Anybody who believes this is an environmental tax is being duped," he said. "Not a single penny of it goes on improving the environment."

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