BA falls back down to earth

17 May 2004 By Fiona Maharg-Bravo

It s a good thing British Airways overshot its cost savings target this year. Otherwise it would have made a loss. And unless BA takes an axe to costs again this year, earnings won t grow at all. So much for the cyclical recovery.

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British Airways reported a 1.5% decrease in revenues to £6.5bn in the year ending March 2004 due to the war in Iraq, SARS and economic weakness in the first half of the year. Passenger revenue per kilometre was down 4% while overall load factor rose 1%. But operating profit increased 37% in the same period thanks to cost cutting. BA said it overshot its £650m annual cost savings target by £219m.

Net debt fell by £991m £4.1bn, thanks in part to strong cash flow before financing of £874m.

Rod Eddington, BA's chief executive, said the shorthaul business was near breakeven. It made a loss of £60m, compared to £117m last year. But Eddington warned of further competition from budget airlines. Although he expects fares to fall further this year, overall revenues should increase 2%3% thanks to increase in volumes. BA expects fuel costs to be £150m higher than last year.

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