Grey Skies for BA as Revenues Fall and Losses Take Off

BA has announced some terrible financial figures. Having made a profit in excess of £900m last year, BA this week reported a loss before tax of £401m for the year to 31 March, after seeing its results hit by a weak pound and higher fuel costs. The airline spent more than £3bn on fuel in the last year - it has hit by being fully hedged at an oil price well above $100 a barrel. The falling pound is also a headache for BA executives as the oil it buys is priced in dollars.

The airline is vulnerable to the particular circumstances of this recession. It has been hit hard by higher oil prices and a fall in revenues from premium passengers on core business routes - Revenues were down 8.4 per cent year on year and sales of BA’s premium seats fell by 15 per cent in March and April this year

In response BA has scrapped its dividend and it will continue to seek cost reductions by cutting capacity by 10 per cent (grounding 16 planes from October) and shedding more than 2,500 jobs in a bid to reduce some of the £2.4 bn debt mountain - a debt that is twice the size of a year ago. Redundancies however carry their own costs, it is estimated that the current round of job losses will cost BA more than £80m in redundancy payouts.

Cut backs will have a big impact on their supply-chain businesses. BA has 250 major suppliers – including airports, telecoms providers and caterers.

In these turbulent times, airline alliances provide a degree of protection. BA is seeking a merger with Iberia and a tie-up with American Airlines in an effort to prosper in the consolidating airline industry

This Reuters news video includes a short interview with Chief Executive Willie Walsh

And this piece by Tom Symonds the BBC’s Transport Editor is terrific on the wider problems facing this flagship airline,