British Airways seeks revival

Ready for take off: BA hopes to have turned the corner

British Airways claimed signs of revival as it said improved staff morale and a focus on high paying passengers were beginning to pay-off.

The airline reported an £8m pre-tax profit in the three months to the end of June, excluding a one-off £58m loss.

These results reflect the scale of the challenge we face in a highly competitive and price-sensitive market

Rod Eddington

That compares with a profit of £23m in the same period in 1999 and shows how big a task faces its new Australian chief executive Rod Eddington.

The airline's results were in line with analyst expectations, with the yield, or amount of money it received per seat, up 2.9%.

This helped to contain the effects of the increased cost of aviation fuel and allowed it to post a 3% rise in operating profit for the period.

Greater competition on North Atlantic routes, higher fuel costs and competition from low-cost carriers caused BA's profitability to plunge last year, when the airline lost £244m before one-off items.

Encouraged

"These results reflect the scale of the challenge we face in a highly competitive and price-sensitive market," said Mr Eddington.

BA has made a series of changes in its attempts to return to profitability, including reducing its overall number of passengers and instead increasing its focus on having more premium - business class - passengers per flight.

Lord Marshall, BA chairman, said the airline was still in talks with Dutch rival KLM regarding a possible merger or alliance of some sort.

"We remain encouraged by the generally favourable economic climate which prevails in most of our key markets around the world," he said.

"However, the effect of a persistently strong pound ... and the high cost of fuel gives cause for concern."

He also said BA hoped to get more benefits from improved customer service and the "increased focus on employee morale".

Investors appear to be backing British Airways' recovery plan, with its share price now 50% higher than its low point of 261.25p hit on 15 February.

Following the latest results on Monday, BA shares were up from 391p to 394p.