BA apologises over £80m cost of cabin crew chaos

Willie Walsh, the chief executive of British Airways, apologised to customers yesterday for the disruption caused by this week's aborted cabin crew strike and warned shareholders that it would cost the airline £80m.

The apology came as BA announced a 32 per cent fall in third- quarter profits to £113m due to higher fuel costs and a combination of tighter security restrictions, baggage handling breakdowns at Heathrow and fog in the run-up to Christmas.

Mr Walsh said that although the two-day strike had been averted at the eleventh hour, it had still resulted in direct losses of £20m on Tuesday and Wednesday as planes flew less than a quarter full. BA also received a further £60m reduction in forward bookings.

"The patience and loyalty of our customers has been tested and I want to apologise for the inconvenience they have suffered," said Mr Walsh. The £80m cost of the dispute has led BA to reduce its revenue growth forecasts for the full year to between 3.25 and 3.75 per cent, compared with its previous guidance of 4.5 to 5 per cent.

But BA shares shrugged off the strike costs with the bigger-than-expected fall in third-quarter profits climbing 8.5p to close at 554p.

BA said the pre-Christmas problems had cost it £40m, while overall costs in the October-December period had risen by 3 per cent to £1.93bn, largely due to an 11 per cent increase in fuel charges. The operating margin for the quarter fell from 8.6 per cent to 6.2 per cent.

But Mr Walsh said he remained confident that BA would achieve its twin goals of a 10 per cent operating margin and £450m in cost savings by March next year, when it moves its Heathrow operations into the new Terminal 5.

He added that now BA's pension fund deficit had been settled, the airline expected to place an order worth about $2bn for 10 new long-haul aircraft in the next four to six weeks. BA is weighing up whether to buy the Airbus A330 or the Boeing 777.

A much bigger order, potentially worth $10bn, for aircraft to replace BA's ageing 747 jumbos and 767 jets will not be placed until later this year. Boeing's 787 Dreamliner and stretched 747-8 are in competition with the Airbus A350 and A380 super-jumbo.

BA said it expected full-year fuel costs to be £350m higher at £1.95bn. This is £40m less than it had previously forecast because of the recent fall in oil prices. Some 93 per cent of BA's fuel requirements for the final quarter of the year are hedged.

The pension deal, which will see BA inject £800m into the fund in return for staff accepting reduced benefits or increased contributions and a later retirement age, is designed to eliminate the £2.1bn deficit over 10 years. Of BA's four unions, only the GMB has yet to accept the new terms, but Mr Walsh said this would not prevent the changes in March or April.