BBC NEWS Americas Africa Europe Middle East South Asia Asia Pacific Arabic Spanish Russian Chinese Welsh

 You are in: Business
Front Page 
UK Politics 
Market Data 
Your Money 
Business Basics 
Talking Point 
In Depth 

Commonwealth Games 2002

BBC Sport

BBC Weather

Tuesday, 6 November, 2001, 10:19 GMT
BA facing 'massive losses'
BA aircraft at Heathrow
Passenger numbers have fallen sharply
Europe's largest airline, British Airways, has announced a dramatic slump in profits for the three months to the end of September.

But the airline has avoided slipping into the red as some analysts had feared.

The outlook for the second half is difficult to predict, although we anticipate a significant operating loss for the year

Lord Marshall,
BA chairman
It announced profits of 5m for the second quarter of the financial year, compared to profits of 200m for the same period last year, a fall of 98%.

The huge drop reflects an unprecedented downturn in traffic following the 11 September terror attacks on the United States.

But BA's fortunes are set to get significantly worse, with the City expecting massive losses in the region of 750m by the end of the financial year, in April.

BA chairman Lord Marshall acknowledged that the situation was dire: "The outlook for the second half is difficult to predict, although we anticipate a significant operating loss for the year."

It would be the first time the airline has failed to make a profit year-on-year since it was privatised in 1987.

BA 'will survive crisis'

BA chief executive Rod Eddington has said he is confident that BA can survive the current crisis, as it had 1.1bn in cash reserves and could draw on a further 800m.

It also has reasonably liquid assets, including property and a stake in Australian carrier Qantas, although it has no plans to sell these at the moment.

The airline, which was struggling with over capacity before 11 September has axed 7,200 jobs so far this year in an effort to cut costs.

It is thought to be burning through about 2m in cash a day and is widely expected to approach the government for financial help.

Further job cuts have not been ruled out.

Traffic slump

On Monday, BA said it had suffered a 25% fall in traffic in October, although this was better than than 30% fall predicted by some analysts.

BA shares fell sharply ahead of the release of the traffic statistics but the smaller than expected downturn lifted the stock back into the black.

BA shares jumped 5 points as the markets opened on Monday, before falling back to 156.25, one point ahead of Monday's closing price.

However, there were still fears that BA faced relegation from the blue chip FTSE 100 index.

Tony Craze, of Christows stockbrokers, told BBC Radio 4's Today programme that FTSE relegation was a very real possibility, which would be a "disaster" for Mr Eddington.

He said Lehman Brothers were suggesting that BA stock was worth just 80p.

Weak future

In its traffic statement, BA said bookings in some areas could pick up by the end of the year.

"Forward bookings for November indicate a similar traffic decline to October, with the US, Middle East and Japan being the worst affected markets," BA said.

But "early indications for December suggest a slight improvement on November", the airline said.

KLM deal

Mr Eddington said BA was still in talks with KLM over a possible merger.

The Dutch carrier unveiled an 18% fall in passenger traffic following the attacks in the US.

It said the biggest decline was on North Atlantic routes, traffic dropped by 34%.

There were also falls in traffic in Europe, Asia Pacific, the Middle East and South Asia, but an increase in passengers in Africa and Mid-South Atlantic.

KLM said it had cut capacity by 5%.

The BBC's Simon Montague
"BA is heading for a disastrous financial year"
Rod Eddington, BA chief executive
"Trading conditions have been extremely tough"
See also:

06 Nov 01 | Business
BA plays consolidation game
06 Nov 01 | Business
Sabena 'to suspend operations'
05 Nov 01 | Business
BA traffic falls by one-quarter
09 Oct 01 | Business
British Airways to cut workers' pay
05 Nov 01 | Business
Emirates airline's $15bn plane order
05 Oct 01 | Business
Easyjet weathers storm
05 Nov 01 | Business
Ryanair profits soar
09 Sep 01 | Business
British Airways confirms job cuts
18 Sep 01 | Business
UK airlines call for state aid
Internet links:

The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.

E-mail this story to a friend

Links to more Business stories