DAVID LEARMOUNT / LONDON
A slump in premium traffic last month and announcements of big jobs cuts, along with warnings of deepening losses by City analysts combined to send British Airways' share price tumbling last week below 300p ($4.2).
Just-released August figures show overall traffic in revenue passenger kilometres (RPK) down 10.8% compared with BA's capacity cut of 8.7%. Most worrying for the carrier as it continues its strategy of reducing capacity in favour of attracting high yield passengers was a 11.6% drop in premium class figures. Economy fell by 10.7%. European and UK passenger numbers were actually up by 5.8% for the month, and RPKs by 1.2%, but transatlantic traffic - by far BA's biggest profit-maker - crashed 17% by both measures, as did Asian traffic.
The premium class traffic slump confirms a recent warning by Oneworld alliance partner American Airlines that it was witnessing the most "precipitous fall in business traffic" in its memory.
In response to the worsening business environment, BA has announced 1,800 job cuts "across the board" this year with more to come in 2002. It had already reduced the workforce by 3,000 to 62,000 last year. In addition to the job cuts, the retirement of five Boeing 747-200s will also be accelerated by a year, leaving the fleet in early 2002. BA says that it should have slimmed to "target capacity" by 2003, representing cuts of 20% over three years.
The climate at BA has further worsened with the publication of a report by the airline's broker, Merrill Lynch, forecasting a loss of some £65 million ($97 million) this financial year. The estimate, compared with a previous projected £150 million profit, was given the seal of approval when it appeared last week as the lead story in the airline's staff magazine just days before the job cuts.
Analysts at Dresdner Kleinwort Wasserstein weighed in with more gloomy forecasts a few days later warning of continuing losses in the foreseeable future and unsustainable dividend levels, sending the shares into a spin.
This was against a backdrop in which BA's first quarter (April-June) pre-tax profit of £40 million compared with a same-period loss of £50 million in 2000. This improvement was largely the result of the sale of its low-fare subsidiary airline Go for £100 million.
Source: Flight International
