Fuel costs hit BA profits

British Airways saw profits drop to £75 million in the three months ending December due to a 47% hike in fuel costs.

The pre-tax profit of £75 million for the quarter to December 31, 2004 compared to a profit of £125 million for the same period the previous year.

The figures took the results for the nine months to a profit of £410 million against £185 million the year before.

The airline said selling costs continued to reduce – down by 10.2 per cent in the quarter – due to lower commission payments to travel agents and growth in online bookings.

As reported, commission payments to UK travel agents will be axed from May 1. BA said agents will be free to charge their own scale of service fees in addition to the ticket price. Service fees of £15 on short haul bookings made via the telephone have been extended to long haul flights.

BA added that the total revenue outlook for the year to March 2005 is “slightly better” than  previously forecast, with a 3.0-3.5% improvement anticipated compared with a level of  2-3%.

Commenting on the three month figures, BA chief executive Rod Eddington said: “These are respectable results in a quarter where fuel costs increased by £106 million (47.3%). 

“Our focus remains on reducing controllable costs and debt whilst continuing to invest in our products. For example, we have taken delivery of six Airbus A321 aircraft and next month we will start further improvements to our Club World flat beds.”

Chairman Martin Broughton added: “Market conditions for the current financial year remain broadly unchanged.  For the year to March 2005, the total revenue outlook is slightly better than previous guidance with a 3.0-3.5% improvement anticipated. All market segments remain price sensitive and yield declines are expected to continue.

“Fuel costs net of hedging are still expected to be about £245 million more than last year. Passenger and cargo fuel surcharges partially offset this increase.”

Overall load factor for the quarter was up 1.2 points at 69.9 per cent. For the nine months, overall load factor was up 2.1 points at 70.2 per cent, BA said.

January traffic was higher by 8.1% over the same month last year.  This resulted in a passenger load factor up by 3.2 points versus last year, to 72.3%.

The increase in traffic comprised an 11.8 per cent rise in premium traffic and a 7.5% rise in economy. 

Report by Phil Davies