British Airways is reacting to disappointing first half results and an impending economic downturn by realigning its fleet and route network.
Pre-tax profits for the airline dropped 10.5% to £385 million ($639 million) for the first six months to 30 September as a downturn in the world economy and falling premium passenger traffic took their toll on the carrier's bottom line.
Company executives will be watching nervously to see the extent to which October's 2.4% fall in high yield passenger numbers is repeated in the coming months. Meanwhile, the October downturn contributed to a revenue-per- passenger-kilometre fall of 4.1% for the first half while load factors were down 2%. Operating profits rose 27.6% to £435 million and turnover increased 6% to £4.7 billion for the first half.
"Despite current global economic uncertainties, we are taking the necessary steps to ensure that we are in a flexible position to meet future challenges," says BA chairman, Lord Marshall.
The carrier is already moving to offset the effects of the worsening economic climate by slashing capacity growth next year from 8%to 2% and reshuffling its fleet. The next few weeks should reveal whether further capacity reductions are required for the 1999 summer schedule. BA has already announced an early phasing out of its McDonnell Douglas DC-10 next year and is now completing plans to speed up the phase-out of 16 Boeing 747-200s. In addition, the company is switching away from 747-400s to use more 777s.
The airline ordered an additional 16 777s earlier this year as part of the capacity change.
Further moves to anticipate future market conditions include axing unprofitable routes. BA is also examining a number of marginal routes with a view to "matching capacity to demand", says a senior company executive.
Source: Flight International
