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Change Your Life! |
British Airways sees doubling in fourth-quarter loss |
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News |
May 24, 2000
LONDON, MAY 23 (AP) - British Airways PLC on Tuesday reported a 98 percent plunge in its annual pretax profit, which it blamed on steeper fuel bills, the strong pound and corporate restructuring costs.
Problems intensified during the fourth quarter, when Britain's unofficial flagship airline posted a pretax loss of 175 million pounds (dlrs 263 million) - more than double its 85 million pound (dlrs 128 million) loss for the same period a year ago.
For the full year ending March 31, BA reported a pretax profit of 5 million pounds (dlrs 7.5 million), down from 225 million pounds (dlrs 338 million) in 1999. Results were even worse than they appeared because the annual profit included a one-time gain that masked what would have been an annual pretax loss.
"These results mark the end of the most difficult year that British Airways has had since privatization," chairman Lord Colin Marshall said in a statement.
Even so, BA met its target of cutting more than 1 billion pounds (dlrs 1.5 billion) in yearly costs, and its profit results exceeded the expectations of many analysts.
BA shares were trading 5 percent lower at midday, at 355.5 pence (dlrs 5.33) each.
Fourth-quarter revenues improved to 2.11 billion pounds (dlrs 3.17 billion) from 2.04 billion pounds (dlrs 3.06 billion) a year ago, but BA suffered a quarterly operating loss of 81 million pounds (dlrs 122 million) compared to 51 million pounds (dlrs 76.5 million) in the same quarter of 1999.
Annual figures showed a similar trend, with revenues improving slightly to 8.94 billion pounds (dlrs 13.4 billion) from 8.89 billion pounds (dlrs 13.3 billion) the year before. The airline's annual operating profit fell to 84 million pounds (dlrs 126 million) from 442 million pounds (dlrs 663 million).
Operating expense rose by 4.8 percent last year, and the revenue generated per kilometer of passenger traffic fell by 0.7 percent.
"Whilst airlines have reduced capacity growth plans, we still expect the excess capacity in some of our key markets to take some time to unwind," Marshall said.
Competition and excess capacity has been especially fierce on transatlantic flights and on European routes where BA must vie with cheaper, low-budget airlines.
The company paid an additional 67 million pounds (dlrs 101 million) for jet fuel last year, due to a tripling of global crude oil prices. BA also paid 88 million pounds (dlrs 132 million) in restructuring costs.
Adding to the strain was a non-cash expense of 136 million pounds (dlrs 204 million) resulting from the translation of revenues from overseas operations into pounds.
BA's annual pretax profit included a one-time gain of 249 million pounds (dlrs 374 million) from the sale of assets. The gain included 149 million pounds (dlrs 224 million) from the disposal of BA's remaining stake in the ticket booking system Galileo International Inc. and 58 million pounds (dlrs 87 million) from the sale of its holding in the communications company Equant.
Economic conditions have improved somewhat, and the outlook for business this summer is better than it was last year, the airline said.
BA said that e-commerce and the procurement of supplies via the Internet should help it trim sales and distribution costs, while enhanced services should increase its appeal to economy and premium passengers alike.
"I believe that the basic planks of our strategy which include developing frequency, network and customer service are a good foundation for a return to profitability," said Rod Eddington, who recently took over as chief executive after the departure of Robert Ayling.
The government privatized BA in 1987, 48 years after nationalizing its predecessor, British Overseas Airways Corp.
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