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British Airways post biggest ever loss since 1987 news
22 May 2009

UK's flagship airline British Airways (BA) reported yesterday it's biggest ever loss since 1987, as the global recession took its toll with reduced passenger and cargo demand and high fuel prices last summer contributing to its £220 million operating loss.

The airline, which was privatised in 1987 and had reported a record £922 million profit last year, said that apart from lower passenger traffic and a 13 per cent drop in premium travel, an almost £3-billion fuel bill, made the UK flag-carrier plunge to a pre-tax loss of £401 million.

Its £220 million operating loss is slightly more than the £150 million loss that the airline had forecasted in March. (See: British Airways forecasts loss for second year running, warns of job cuts

British Airway's chief executive Willie Walsh, said in a statement,  ''The prolonged nature of the global downturn makes this the harshest trading environment we have ever faced and, with no immediate improvement visible, market conditions remain challenging. It is vital, therefore, that we remain absolutely committed to our plans to establish British Airways as a high-performing, market-focused, global premium airline.''

The iconic British airline said it would adopt cost-cutting measures like scaling down on spending, cutting its capacity by 4 per cent with grounding up to16 aircrafts.
It will also not pay management bonuses, no base-pay increases and is offering staff the option of unpaid leave in order to cut its wage bill.

The company has been reducing its workforce for several years as a result of natural wastage and increased efficiency, and since last summer, the airline has reduced its overall work force by more than 2,500 and has initiated talks with its trade unions about pay and productivity changes.

"While we focus on the immediate situation by reducing costs, investing in improved customer service is vital. With increasing competition and more consumer choice, we need to guarantee our future competitiveness by ensuring that we offer customers excellent service throughout their journey, Walsh said.

British Airway's chairman Martin Broughton said "In the last twelve months we have gone from a record profit to a record loss due to the current tough economic environment. That only serves to underline the extremely difficult trading conditions that we are facing, despite our best ever operational performance, and any recovery is likely to take longer than initially envisaged.''

The economic downturn led to a significant fall in global demand for premium travel, with IATA premium traffic down around 14 per cent in the second half of the year.

BA's premium traffic volume, which started to see some weakness back in August, has steadily declined in the second half in response to the economic slowdown and the company said that significant pricing actions were required to stimulate non-premium traffic volumes, which were broadly unchanged year on year.

The economic downturn had a marked impact on the worldwide demand for airfreight, which saw a significant reduction in the second half of the year. The airlines full year cargo revenue rose 9.4 per cent, despite the fall in demand in the second half.

Cargo volumes, measured in cargo tonne kilometres, fell 5.2 per cent. Despite the favourable impact of exchange, yields also came under pressure in the second half, driven primarily by lower levels of fuel surcharges as the oil price fell.

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British Airways post biggest ever loss since 1987