Outlook: Ayling finding it tough to B. A. popular person
Tuesday 09 November 1999
Strip away one-off items such as redundancy charges, currency effects and profits from asset sales and BA is looking at operating losses of more than pounds 200m over the next six months and underlying pre-tax losses of perhaps pounds 170m for the year. That is quite some achievement for an airline which dominates the world's largest international airport, Heathrow, and whose two most important markets, the UK and US, have either just escaped recession or forgotten what the word means.
Faced with its first loss since privatisation, the decision to hold the interim dividend was welcome. But it may yet prove to have been based on false optimism. With pounds 1bn of cost savings in his back pocket and another pounds 225m in the pipeline, Mr Ayling reckons he can take his foot off the efficiency pedal and start to look at investing in products and boosting staff morale.
Furthermore, BA has boldly gone where others are now following by cutting capacity growth in the hope that the same number of bums will occupy fewer and presumably more expensive seats in future. BA has not yet quite said goodbye to the backpackers at the rear of the plane. But it can only offer $99 return fares from the US to London for so long before accepting that a passenger who does not even pay for his fuel costs is the kind of custom BA can do without.
When BA's latest premium product enhancements - flying beds in Club World and a revamped Concorde - arrive next year, Mr Ayling reckons business passengers will be stampeding down the aisles, leaving the competition to pick up the travellers no one wants - transfer economy passengers. If other airlines fail to grasp the nettle of capacity reduction with the same gusto as BA, and premium passengers decline to put their faith in BA's reclining seats, that strategy could yet be blown off course. Mr Ayling needs a strong tail wind to see him through.
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