Boss apologies to passengers as BA profits slump

A “raft of external factors” such as fog and luggage problems at Heathrow has been blamed for a £53 million drop in British Airways’ quarterly profits.

Pre-tax profit for the three months to December 31, 2006, was £113 million, down 33% from £166 million in the same month the previous year. For the nine months, pre-tax profit was £584 million, against £518 million. 

The airline also expected to take an £80 million revenue hit in the current quarter as a result of the threatened cabin crew strike which was averted at the eleventh hour.

Describing the results for the quarter ending December as “mixed”, chief executive Willie Walsh said costs were up by 3% due to higher fuel costs.

“Revenue has been hit by a raft of external factors,” he said. “These include the  continued impact of the August security measures. Common EU baggage standards on liquids were not agreed until mid-way through the quarter and more restrictive rules on hand baggage continue to apply in the UK.

“As a result, transfer volumes at Heathrow are still down. The baggage system operated by the BAA at Heathrow’s Terminal 4, failed twice in December and severe fog led to the cancellation of 800 flights in the pre-Christmas peak period. 

“The impact of all these external factors in the quarter is estimated at £40 million.

“The patience and loyalty of our customers has been tested and I want to apologise for the inconvenience they have suffered during this period, “ said Walsh.

“The uncertainty caused by the threat of recent industrial action has added to this but we have reached an agreement with the cabin crew branch of the T&G over a range of issues which I am confident forms the basis of a good relationship in the future. 

“We are now re-focusing on customer service to win back the confidence and trust of our customers,” he added.

Chairman Martin  Broughton said: “The market continues to show good demand in premium cabins. The weakness in some non-premium segments  is  also  still  a  feature.

“The revenue outlook for the fourth quarter has been impacted by the threat of industrial action.

“While the strike was averted, the estimated revenue loss is still some £80 million. Revenue guidance for the full year is now 3.25 – 3.75% growth.

“While  cost  control  remains strong, full year costs excluding fuel are expected  to  be  some  £50 million higher than last year. This reflects higher  costs  in the first quarter. Our full year fuel guidance has been revised  down by £40 million reflecting the reduction in fuel prices. The fuel bill will now be accounted for on a continuing operations basis, and is expected to be some £1.95 billion.”

by Phil Davies