Kevin O'Toole/LONDON
BRITISH AIRWAYS HAS once more cruised to a record set of results, helped by a mix of premium-passenger growth and cost-cutting. The performance was marred only by continuing problems at alliance partners TAT and USAir.
Group pre-tax profits were at a new high of £452 million ($710 million) for the financial year to the end of March. This came down to a net result of £250 million after taxes, and a £125 million write-down against its holding in USAir.
BA chairman Sir Colin Marshall says that the write-down, which covers roughly half of its $400 million investment in USAir, was forced by accounting changes, rather than concerns over the health of its US partner.
Presenting the results, Marshall commented on the "irony" of having to make the long-anticipated write-down, just as USAir had won agreement on concessions with its unions. The USAir share-price has virtually doubled on news of the agreement and the carrier's improving financial performance. Marshall, however, plays down the speed with which the union deals may win final approval, saying that it was likely to take place "very much later this year".
He adds that BA achieved the targeted $100 million bottom-line benefit from the USAir code-sharing partnership, and is confident of "...doing better than that this year". US connecting traffic more than doubled over 1994/5, largely on the back of the USAir interlining. On average, around 400 passengers a day are transferring between the two airlines, says BA.
"The only black spot has been the performance of our operating subsidiaries in continental Europe," says BA managing director Bob Ayling. TAT and Deutsche BA (DBA) together racked up losses of £90 million.
Ayling says that the DBA performance was "encouraging" given its breakneck expansion, which saw passenger traffic grow by 72% in 1994. The target for 1995 is for a more moderate 15% growth.
BA is less positive about French subsidiary TAT, which is in the process of a major restructuring which has seen it withdraw from loss-making Scandinavian services and abandon the beginnings of a regional hub at Nice. Ayling says that BA will continue to monitor the performance of the slimmed-down carrier.
The overall contribution from alliance partners came to £50 million, although this is expected to grow significantly this year, helped by the joint services agreement with Qantas Airways which comes on stream in October.
Meanwhile, BA has pledged to continue its twin strategy of pruning costs and improving its passenger mix. BA reveals that it achieved cost savings of £160 million in 1994, beating its target of £150 million. A similar target has been set for the coming year, says Ayling. He says that without five years of consistent cost-cutting, BA would now be posting pre-tax losses of around £300 million, other things being equal.
Premium-passenger traffic continued to recover, growing by 9% over the year, against overall traffic growth of 6.7%. Load factors also reached a record 71.6%, with many peak services now flying full.
Ayling says that with capacity growth planned at a modest 7% over the coming year, the drive will be to raise load factors on non-peak services, and improve the mix where capacity is constrained.
Source: Flight International
