New BA chief concedes there is a long way to go

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The Independent Online

Rod Eddington, the chief executive of British Airways, said yesterday that the airline faced a long haul back to profitability as he battled costs imposed by soaring fuel prices and internal restructuring, while simultaneously handling extended merger talks with KLM of the Netherlands.

Rod Eddington, the chief executive of British Airways, said yesterday that the airline faced a long haul back to profitability as he battled costs imposed by soaring fuel prices and internal restructuring, while simultaneously handling extended merger talks with KLM of the Netherlands.

Presenting the first set of quarterly figures to cover his time at the Heathrow-based carrier, Mr Eddington said: "Three months ago 'cautious optimism' was the phrase I used, and I think that these results are pretty much in line with that.

"There are promising signs in some areas, but clearly we have a long way to go."

Mr Eddington said BA had requested that KLM extend the exclusivity period for their negotiations to create one of the world's top three airlines. Regulatory clearance from Europe and Washington remained a key obstacle, he said.

"Until they [the regulators] are clear about what price they will demand if we are able to complete the transaction, I can't give you a sense of whether the deal is do-able or not," he said.

Mr Eddington, who previously headed the Australian airline Ansett, took up his post at BA in May, replacing Bob Ayling. Last year, BA posted its first loss since privatisation.

Analysts said that yesterday's figures - covering the airline's first quarter to 30 June - were mixed, and it was still too early to judge whether Mr Eddington had turned the tide. Operating profits came in at £97m, 3 per cent up on last year's figure, despite a 70 per cent jump in the cost of aviation fuel. Turnover was 4 per cent higher at £2.3bn.

"People keep telling me that I arrived at an easy time," Mr Eddington said. "I've been in this game for 20 years and there's never been a time when being in the industry could be described as easy."

Guy Kekwick, European airlines analyst at Goldman Sachs, said: "Fundamentals are improving. Demand is better but there are fuel prices and sterling holding them back. It was a finely balanced quarter."

Non-hedged fuel costs in the quarter rose by £74m, and Mr Eddington said the figure for the full year could be as high as £230m. Pre-tax profits were £8m compared with £23m a year ago. The figure excludes the one-off loss of £58m from the sale of Air Liberté, its French domestic unit.

There was some disappointment in the City that growth in passenger yield - revenue per passenger kilometre flown - had slipped to 2.9 per cent, below the 3 per cent-plus figures recorded at the end of last year.

Shares in BA, which have climbed about a third since Mr Eddington's appointment was announced, yesterday closed 3p lower at 388p.

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