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British Airways profits take-off

©

Latest update : 2008-05-17

British Airways flies high, despite turbulence in the aviation sector. The airline doubled its profits for 2007, but predicts a difficult year ahead.

British Airways said Friday that its annual net profit more than doubled as it cut costs to help offset record high fuel prices while the group offered its first dividend in seven years.
  
BA however warned of a difficult outlook amid an economic downturn and after the catastrophic opening of London Heathrow airport's new Terminal 5 which is exclusively used by the British airline.
  
BA said net profit rose to 680 million pounds (857 million euros, 1.33 billion dollars) in the 12 months to March from the year-earlier 290 million pounds, sending its share price surging by more than six percent.
  
Group revenue rose 3.1 percent to 8.75 billion pounds, the airline said in an earnings statement.
  
"This is an outstanding financial result for the company despite rising fuel prices and significant economic slowdown in the last six months," said BA chief executive Willie Walsh, who has foregone a bonus payment because of the chaos surrounding Terminal 5.
  
"We have achieved our goal of a ten percent operating margin which I am delighted has triggered the reward scheme for our staff. For our shareholders too, it signals the welcome return of a dividend -- the first since 2001," he added.
  
Looking ahead, Walsh said "the first quarter (to June) will be particularly difficult. Crude prices have risen from 58 dollars per barrel in the first quarter last year to some 115 dollars this year.
  
"The delayed transition to Terminal 5 affects both costs and revenue, and will feature in the quarter and full year as we deal with the challenges of the move into the terminal. The full year will also be challenging, against an uncertain economic outlook," added BA's boss.
  
Heathrow's new terminal opened on March 27 but was immediately hit by problems with its baggage handling system.
  
It was not until April 8 that BA was able to offer a full short-haul flight schedule in and out of the terminal, which cost 4.3 billion pounds to build.
  
Almost all of BA's long-haul flights from Heathrow had been due to switch to Terminal 5 from April 30 but the change has now been delayed to start in June and last around five months.
  
The chaos has cost the airline at least 16 million pounds, according to its own estimates, and led to the departure of two senior executives.
  
Walsh had rejected media calls for his own resignation, insisting on staying to resolve the fiasco surrounding the terminal. However, he has declined to accept a bonus of 700,000 pounds.
  
"I felt in the context of the disappointing opening associated with Terminal 5 that it would be inappropriate for me to take a bonus despite the excellent financial performance of the company," Walsh said on Friday.
  
BA's latest results meanwhile revealed his success in slashing costs, excluding the airline's fuel bill.
  
Total operating costs were down 0.7 percent to 7.9 billion pounds in 2007/08. Employee costs fell 4.9 percent to almost 2.2 billion pounds due to reduced pension and severance costs.
  
BA's fuel bill for the year was up by 124 million pounds and it could total as much as 3.0 billion pounds this year -- more than a quarter of the carrier's full-year costs.
  
In a bid to offset the rising fuel cost, BA on May 2 hiked surcharges on both long-haul and short-haul fares. The price of New York crude oil struck a record high of 126.98 dollars per barrel on Tuesday.
  
In late morning trade after BA's results, the airline's share price jumped 6.03 percent to 237.50 pence on London's FTSE 100 index, which was 1.33 percent higher.
  
BA on Friday proposed a dividend of five pence per share.
  

Date created : 2008-05-16

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