ALEXANDER CAMPBELL / LONDON
UK flag carrier suffers worst full-year deficit since privatisation, but cuts produce better fourth quarter
British Airways will not know for another 12 months whether its Future Size and Shape cost-cutting plan will be enough to return it to profitability, but has taken some comfort from the reduced costs and improved operating performance reported last week for the fourth quarter.
BA's optimism comes despite a £200 million ($294 million) loss before tax for the full year to 31 March, 2002 - its worst result since privatisation 15 years ago. The full year deficit reassured investors, however, who had been told to expect up to £400 million in losses.
Sales for the year were down 8%compared with 2001, at £8.3 billion. Capacity cuts introduced after 11 September helped keep load factors from collapsing, but more cost-cutting will be needed to return the UK flag carrier to profitability.
The Future Size and Shape plan, revealed in February, calls for a further 5,800 job cuts on top of over 7,000 previously announced, capacity cuts at London Gatwick and a fleet reorganisation (Flight International, 19-25 February). "Not all the measures we announced then have been brought in," says BA, "but they will all be in place within 12 months [by March 2003]."
BA says the actions it has already taken resulted in an improved fourth quarter cost performance. Total costs, before restructuring, for the quarter were down 12.1%. Its pre-tax loss for the quarter was £85 million compared with a £65million loss a year earlier, but less of a drop than in previous quarters, while operating losses improved on last year at £45 million (£61 million a year ago).
BA's situation was helped by sharply lower crude oil prices, which cut spending on oil and fuel for the year by just under £100 million compared with the year before.
Chief executive Rod Eddington says that "the market is expected to remain soft" in 2002 and the airline will continue cutting costs.
Source: Flight International
