British Airways (BA) fell to a worse than expected first-half loss and forecast annual revenue would be £1 billion (US$1.66 billion) lower than last year, but said traffic volumes and yields had stabilized.
The airline, whose alliance with American Airlines and Spain’s Iberia is being scrutinized by European and US competition watchdogs, yesterday reported a pretax loss for the six months ending September of £292 million (US$484.5 million), while revenues fell 13.7 percent to £4.1 billion.
BA’s pretax loss — impacted by higher debt levels, lower interest rates, a higher pension burden and restructuring costs of £48 million — compares with a pretax profit of £52 million it made in the same period last year and expectations for a loss of between £235 million and £255 million in a survey of six analysts by Reuters.
The airline said it would look to drive more costs out of the business in the coming months.
“Our revenues are likely to be about £1 billion lower this year so we’re determined to reduce costs further,” chief executive Willie Walsh told reporters on a conference call.
He added that the airline was “riding along the bottom” of the downturn.
The global recession has battered the airline industry as consumers cut back on trips abroad and lucrative business class travelers fly less. BA has also been hit by growing competition from low-cost carriers and potential labor strikes.
The International Air Transport Association recently said it still expected airlines to lose US$11 billion this year.
Walsh also said he was “confident in the strength” of BA’s case to win US Department of Transportation approval for a sales tie-up with American Airlines and Iberia.
BA said passenger revenue fell 13.6 percent, on capacity 3 percent lower, while yields — the revenue it makes on each passenger for every mile traveled — were down 12.2 percent.
However, it said both volumes and yields had “started to stabilize,” with analysts predicting the worst could now be over for the airline.
Walsh said that conditions in the aviation market were still challenging, which is bad news for planemakers Boeing and Airbus who are headed for their worst annual order tally in at least 15 years.
BA is expected to report a pretax loss of £568.76 million for the year to the end of March, a Thomson Reuters IBES poll of 19 analysts said.
Earlier this week Irish budget airline Ryanair reported an 80 percent increase in first-half net profits, while Scandinavian airline SAS reported a surprise third-quarter pretax profit of US$16 million.
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