British Airways reports £160m third-quarter loss. . . .British Airways reported a large third-quarter loss on Monday and warned that it still faced "considerable challenges" despite some signs of a recovery in the market.
Europe's leading carrier recorded a pre-tax loss of £160m ($226m) in the three months to the end of December, against a profit of £65m for the same period a year ago.
The result was considerably better than the forecast consensus loss of £230m. But the shares, which rallied at the end of last week after cautious optimism about prospects from rival KLM and major US carriers, fell 5¾p, or 3 per cent, to 206¾p in London in early morning trading.
BA is next week expected to announce thousands more redundancies as part of a major restructuring of the airline. But Rod Eddington, BA's chief executive, refused to be drawn on the details of the strategic review - called Future Size and Shape - although he admitted there would be "an important impact on jobs."
Speculation about the scale of the losses, has ranged from 4,000 to 16,000. BA is already cutting 7,200 jobs in the aftermath of the September 11 attacks and had shed 5,800 of those by the end of the third quarter.
"We have made real progress in managing our costs but British Airways still faces a number of other considerable challenges some of which were apparent before the terrorist attacks on the USA," Mr Eddington said.
The planned restructuring is expected to focus on tackling the highly unprofitable European operations, which are increasingly suffering in competition from the low-cost carriers.
Mr Eddington has set an ambitious target to deliver profit margins of close to 10 per cent, a level almost unheard of in aviation.
BA's perennially loss-making short-haul operation at London Gatwick faces the biggest shake-up, but Mr Eddington denied he was planning to set up another low-cost carrier less than a year after selling Go. He said he remained convinced that running a full-service and a no-frills carrier within the same airline was unmanageable: "No-one has ever been able to do it."
Mr Eddington said there were no plans for a rights issue to cut the carrier's £6bn debt burden but said that reducing the debt was "a major priority for us."
The third quarter results - one of the biggest quarterly losses in BA's history - reflect the magnitude of the task.
The airline recorded an operating loss of £187m, compared with a profit of £80m a year ago. BA's loss per share was 13.4p against a profit of 3.3p last time.
The result, which was lifted by one-off gains of £34m, largely from the disposal of investments, left BA with a nine month pre-tax loss of £115m, compared with a profit of £215m a year ago.
But BA said demand was beginning to recover from the slump that plunged the industry into crisis in the first few months after the terrorist attacks on the US in September.
"The general economic weakness in many of our key markets is expected to continue, however, the initial uncertainty and concern caused by the events of September 11 have diminished and as a consequence there is an improving revenue trend," said Lord Marshall, BA's chairman.
Revenues fell by almost 20 per cent to £1.84bn in the third quarter as BA, like its rivals, responded to the fall-off in demand, by cutting capacity and discounting heavily.
Nevertheless, passenger yields, a measure of ticket prices, rose by 0.3 pe rcent in the quarter.
The cut in seat capacity in the quarter of 16.3 per cent lagged a 20.3 per cent fall in traffic. The North Atlantic, BA's most important market, was the worst hit by the terrorist attacks, which compounded the US economic recession.