British Airways revealed the biggest losses of its 22-year post-privatisation history yesterday, along with predictions that revenues will slump by £1bn over the whole year.
Revenues for the six months to September were down by 13.7 per cent, producing operating losses of £111m and pre-tax losses of £292m.
But it was not all doom and gloom. BA's shares soared by 6.7 per cent to close at 199p as the City reacted to hints in the carrier's traffic figures for October that the worst may finally be over.
Willie Walsh, BA's chief executive, who is locked in negotiations with trades unions that could yet turn into damaging Christmas strikes, was unsurprisingly downbeat.
"The numbers are very much in line with expectations in terms of trading conditions, the economic environment and the financial performance," he said. "We see very clearly that things are not getting any worse, but there is no evidence of things getting any better either."
He was also keen to emphasise the continued downward pressure on the group's financial performance, predicting not only revenues down £1bn over the year as a whole but also losses exceeding last year's unprecedented £401m black hole.
But traffic figures for the crucial "premium" seats in business and first-class that produce a disproportionate amount of BA's profits do offer a glimmer of light. Although October's overall premium traffic was still down by 1.4 per cent year on year, long haul showed a 2 per cent improvement. And yields – a key metric of revenue by passenger mile – have also started to stabilise, although still down a startling 12.2 per cent.
Short-haul premium traffic is still hard-hit, raising the possibility that business class flights from Gatwick could be scrapped altogether. Heathrow has a lot of connecting traffic, so a proportion of its short-haul premium seats are automatically filled. Gatwick has no such advantage, and Mr Walsh admitted yesterday that it is an issue likely to be considered by BA "sooner rather than later".
In the face of savage market conditions, BA has cut operating costs by 8.7 per cent. The equivalent of 4,900 jobs will go overall this financial year, some 3,700 of them in the UK, through a combination of reduced overtime, part-time working and voluntary redundancy. So far 1,900 positions have already been eliminated in the UK, with another 3,000 targeted by March.
Disputes with the Unite and GMB trade unions have been running for months over attempts to slash £140m from BA's cabin crew budget by reducing staff numbers on flights and freezing pay for two years. This week Unite members voted to ballot for industrial action to go ahead on 21 December. But BA management also won a minor victory when staff "unwillingly" agreed to work the revised schedules pending a full High Court hearing of their legal challenge in February.
Mr Walsh said yesterday that talks of strikes at Christmas were "premature". "The unions are yet to advise us formally of an intention to ballot," he said. He also gave short shrift to rumours that long-running merger negotiations with Iberia are on the brink of conclusion, and to the suggestion of a head office move to Spain. "I won't be moving to Madrid," Mr Walsh said. "These rumours are pure speculation."
Despite the improved traffic numbers, BA is some way from recovery, Gert Zonneveld at Panmure Gordon said. "You don't recover from 12 per cent yield decline overnight. BA is making progress in slashing costs, but it will need a substantial improvement in the economic environment to move back to a decent level of profitability."