BA faces £100m fuel hike challenge

The soaring cost of fuel will continue to make the year “challenging,” British Airways said today while releasing latest financial results.

The airline saw pre-tax profits rise by almost 35% to £788 million in the nine months ended December 31, 2007.

Fuel costs were up £72 million in the third quarter.

Looking forward, BA said: “Our fuel costs will continue to rise and are now expected to be up more than £100 million on last year.

“This year’s increase will be offset by reductions in other operating costs but our ability to mitigate rising fuel costs next year will be challenging.

“Long haul premium traffic continues to be strong, supporting our decision to make more premium capacity available.

“We have seen some fall in non-premium bookings in the January booking period compared to last year.”

Following the crash landing at Heathrow in January involving a Boeing 777, the aircraft has been written off by underwriters and the insurance claim agreed in full, BA revealed.

The airline admitted that prior to Terminal 5 opening in March, punctuality and baggage performance “remain a challenge” at Heathrow where facilities are old and overstretched.

“Heathrow was designed to handle 45 million passengers but today looks after 67 million passengers per year. Both these key areas will be improved significantly when we move to our new home in T5 but, in the meantime, we remain focused on improving our current performance,” the airline said.

“We are always looking for opportunities to increase our slot portfolio at Heathrow and we have acquired seven daily slot pairs during the nine months. Our share of slots at Heathrow is 41%.”

Chief executive Willie Walsh, said: “This is another good set of results despite soaring fuel costs and difficulties in the market. 

“Revenue up some one per cent and a strong cost performance has led to an operating profit up 28.5%. While fuel costs in the first six months were down £36 million, they have soared £72 million in the third quarter.”

He added: “The opening of Terminal 5 is now less than two months away and the public trials and previews for our Executive Club members have been very successful.

“When it opens in March our passengers will be able to enjoy a calm and effortless experience. The suite of lounges will be the largest and most luxurious in the world and will allow our passengers to work or relax in comfort.”

Passenger revenue at £5.7 billion for the nine months was up 1.7% on capacity up 0.8 per cent. Seat factor was down 0.6 points to 77%. 

Yields were up 1.5% mainly due to more premium passengers travelling, although the gains were partially neutralised by exchange rates, mainly the US dollar.

Club World and First performed strongly, driving an overall 4.2% increase in premium traffic. Short haul premium traffic has weakened and economy traffic on the North Atlantic remains soft, the airline said.

by Phil Davies

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