Profile: British Airways

Still looking for a bright future

Only a few months ago it seemed that British Airways was heading for better times.

In May the airline reported a sharp rise in profits and revealed that it was making more money from each customer than it has done since it was privatised in 1987.

The new chief executive, Rod Eddington, was being congratulated for turning BA around after years in the wilderness with former boss Bob Ayling.

After coming on board in May 2000, Mr Eddington made it clear that he would stick with BA's new strategy of focusing on the highly profitable business segment.

The airline offered improved amenities, including sleeper seats, in an attempt to lure business travellers at the expense of economy class customers.

Back in the black

As 2000 ended the strategy seemed to be paying off.

BA moved back into the black after watching its profits plummet by more than 50% in 1999 - its worst year since 1982.

Mr Eddington's strategy seemed to be working

In June this year it completed its sale of Go, a no-frills airline, making a £75m profit from its initial investment three years ago.

But the recent news that the company will be cutting a total of 7,000 jobs has taken the shine off BA's embryonic recovery and brought back memories of darker days.

While the recent collapse in passenger numbers following the 11 September terror attacks in the United States, has raised the spectre of BA's first full year loss since privatisation in 1987.

Some analysts are predicting losses of as much as £750m for the year, with a collapse in its share price also predicted.

Mr Ayling's period in charge, from January 1996 to March 2000 previously regarded as the most turbulent in BA's history, looks calm by comparison.

Underperformance

During that period BA shares underperformed the market by 40% as Mr Ayling battled with low staff morale, rising fuel prices, the Asian economic crisis, competition from low-cost airlines - and, inevitably, falling profits.

Key dates

Aug 1919: first flight by BA's forerunner company

1935: a number of small UK air transport companies merge to form BA

July 1979: UK government announces its intention to sell shares in BA

Feb 1987: privatisation

Jan 1996: Bob Ayling becomes chief executive

March 2000: Mr Ayling is ousted

May 2000: Rod Eddington becomes chief executive

Mr Ayling tried to be innovative, even introducing funky tailfin designs for BA's aircraft based on Chinese calligraphy, Polish tower blocks, the Kalahari desert and Delft pottery.

The exercise, however, proved a public relations disaster. Even at the launch, Lady Margaret Thatcher draped her handkerchief over an offending model.

Mr Eddington has since announced a return to British livery, reintroducing the Union Flag on each tailfin.

Merger attempts

The unfortunate Mr Ayling, who was ousted in March 2000, was also made the scapegoat for a failed merger with American Airlines, which ran into regulatory problems.

The airline has since attempted to revive the merger, announcing early in August that it had sought US antitrust immunity for a new alliance.

This is the companies' second attempt at cementing their relationship in three years.

They both belong to the oneworld alliance, launched in February 1999. BA uses the alliance, which includes Cathay Pacific Airways, Qantas and four other airlines, to share marketing costs and airport facilities.

Problems in the industry

Despite the advantages of the alliance, BA has worked hard to pull off a more wide-ranging merger.

In September 2000, BA and Dutch carrier KLM ended four months of merger negotiations without agreement, saying they had been unable to resolve a number of issues.

BA's determination to continue to strengthen its ties with American Airlines is symptomatic of problems in the industry as a whole.

Analysts have long argued that airlines need to consolidate so that they can better manage industrywide problems such as over-capacity and rising fuel costs.

Cuts

The attacks on the US on 11 September have been the last straw for the beleaguered airline industry which is suffering from the economic slowdown and falling passenger numbers.

Like many of its rivals, BA says it has been forced to cut jobs, reduce its fleet and the number of scheduled flights.

But despite its problems, the airline is light years away from its roots and the pioneering days of civil aviation following World War I.

In August 1919, BA's forerunner company, Aircraft Transport and Travel launched the world's first daily international air service between London and Paris.

The initial flight carried one passenger and cargo that included newspapers, Devonshire cream and grouse.

Last year more than 48 million passengers travelled on 529,807 flights operated by BA.

But as long as the economic conditions remain tough, BA will struggle to maintain the profits that it was once accustomed to.