Kevin O'Toole/LONDON
As had been predicted, British Airways saw profits slip after a troubled year which included a damaging cabin crew strike. The fall was less than expected, however, and optimism is growing among financial analysts that the worst of the bad news is now over.
The final pre-tax profit for 1997/8 to the end of March came in at £580 million ($950 million). Although that figure was down by £60 million on the previous year, the decrease was less than many observers had expected in the light of the mid-year cabin crew strike, which cost some £125 million, and the strength of sterling, which penalised operating earnings by about £200 million.
The bottom line result was buoyed, however, by the sale of the carrier's US Airways stake for £129 million and of shares in the Galileo computer reservation system for £45 million.
Chief executive Bob Ayling also says that the group's business efficiency programme again delivered savings, this time of £250 million. Unveiled two years ago, the ambitious programme aims to deliver £1 billion in cost reductions by 2000.
Leading European airline analyst Chris Tarry at Dresdener Kleinwort Benson argues that, with the market growing strongly and a strong underlying performance by the airline, BA should re-emerge this year. "The bad news is in the past," he says.
The recovery had already showed through in the March quarter, the last of BA's financial year, with the group showing profits up by a quarter, helped by a 5% dip in costs, led by salaries and fuel.
Earlier, Netherlands flag carrier KLM had shown the way with a record set of results for its financial year, turning around the disappointing results of the year before. Swelled by contributions from its holdings in partners, including Northwest Airlines, the pretax figure swung back to a profit of DFl825 million ($415 million). On top of this, there was another DFl1.6 billion gain on the Northwest share sale.
The improvement in operating figures was also dramatic, with a 12% rise in passenger traffic and a 7% rise in passenger yields, helped by a weak guilder.
Source: Flight International
