British Airways (BA) said yesterday that it expects its operating margin to fall in the 2008-09 financial year to approximately 7%. The UK flag carrier's fiscal year, 2007-08, comes to a close on 31 March.
Earlier statements from CEO Willie Walsh had indicated that the carrier was targeting a 10 per cent margin for the current fiscal. Its operating margin for the nine months ended 31 December was 11.1 per cent.
"The outlook for next year is consistent with economic slowdown, the impact of increased fuel costs and one-off [London Heathrow] Terminal 5 transition costs, all of which analysts have already factored into their expectations," CFO Keith Williams said yesterday.
BA is scheduled to move most of its London Heathrow operation to the new facility on 27 March.
BA said that it expects FY09 revenue to climb 4%-4.5% year-over year to more than £9.1 billion ($18.06 billion). Costs, excluding fuel, should rise by 3%-3.5%, it said, even as fuel expenses jump 20% to £2.5 billion.
It also forecast a 2.4% increase in passenger capacity.
"To some degree, we've started the down-cycle, particularly in the US," Williams said in his statement, but stressed that BA was "well placed" to deal with the slide. "We're going into the downturn from a position of real financial strength."
BA currently is 50 per cent hedged for fuel at an average $81 per barrel for fiscal 2008-09.