British Airways puts bill for T5 chaos last week at £16m

By Danny Fortson

British Airways gave investors fresh cause for worry yesterday after it revealed that it lost £16m due to last week's disastrous opening of Terminal Five and that its all-important premium traffic fell sharply last month.

While T5 seems to be slowly working out the kinks, shareholders will be more concerned by a 5 per cent drop in premium traffic for the carrier in March compared to the same month a year ago. Chief executive Willie Walsh has repeatedly assured investors in recent months that business and first-class bookings, the source of most of the carrier's profits, had remained strong in the face of the stumbling US and UK economies.

The company said the drop could partly be explained by the timing of Easter, which fell in April last year. Non-premium traff-ic also slumped by 2.3 per cent.

A weakening of such a crucial part of its business could be debilitating to the company's efforts to stave off the worst effects of a fuel bill that will jump by 20 per cent to £2.5bn this year. BA said it expects to see similar traffic drops next month.

The news was tempered by the revelation that the financial damage wrought by the botched opening of Terminal 5 last week, which led to the cancellation of more than 300 flights and the stranding of 25,000 bags, was less than feared. Speculation had put the cost at £50m. The carrier hopes to begin operating all of its scheduled flights out of its new hub by this weekend. About 14,000 bags must still be returned to customers.

BA's downbeat outlook comes as the scalps claimed by the unprecedented price of jet fuel start to pile up. So far, only marginal carriers have been caught out. ATA Airlines, an American carrier, filed for bankruptcy yesterday, just days after Aloha Airlines collapsed. Vueling, a Spanish low-cost carrier launched by Apax Partners that has lost 80 per cent of its market value amid rising losses, may merge with Iberia's Clickair. Alitalia, Italy's state-owned basket case, is facing bankruptcy after Air France-KLM withdrew its takeover offer after talks with unions broke down.

BA used the monthly traffic announcement to have yet another dig at the Civil Aviation Authority, which recently proposed significant increases to landing charges at Heathrow. BA said: "The decision demonstrates conclusively that the airport regulation system has failed, to the detriment of customers."