Profit or greed?

[spannerless]

A while ago BA said they needed to charge/increase the fuel surcharge to prevent losses.

Now on the Beeb site they announced a 36% earnings increase due to favourable exchange rates and increased fuel surcharges.

So is this journalistic hype or are BA being gready with their surcharges to make a profit?

Beeb Poop direct extract
(No I do like to see our national carrier do well but I don't like to be ripped off as a customer either).

British Airways (BA) saw earnings rise 36% in the first quarter as first and business class passenger numbers rose.
The airline said operating profit for the three months to July was £176m ($313.1m), compared to £129m last year.

BA added it thought full year earnings would be higher than forecast due to favourable exchange rates and increased fuel surcharges.

Europe's second largest airline said it now expected total revenue for the year to March 2006 to grow by 5.5% to 6.5%.
In June, BA increased its fuel surcharge on airline tickets for the second time this year.

The yield and revenue situation is improving at a faster rate than the fuel cost increase

Nick van den Brul, BNP Paribas


Check the BA share price

It hiked up the surcharge on each long-haul return ticket to £48 ($87) from £32, and increased it to £16 from £10 on short haul flights.


Guys if you rip the customer off they wont travel!


I here this all the time from customers of my own moaning about flight charges etc.

:confused:

[Super Stall]

With its revenue BA has to repay its debt, fund its pension black hole over the next ten years, it has to start renewing its fleet soon, it has to pay for employee cost rises, it would like to be able to pay a divi to shareholders (can't afford it yet), it has to pay for terminal five, and if the BAA has its way, will have to pay for the new runway at Stansted as well.

Apart for the runway at Stansted if BA fail in any of the above the company will sink and die.

Projections were made a couple of years ago as to how all this would be paid for, and then the price of oil triples.

Loco's have put thier prices up as well, they just don't call the rises surcharges so no news headlines.

[RevMan2]

Work out BA's profit margin - it's paper thin, just the same as the other full-service carriers who are managing to make a profit without enjoying government subsidies. (Avoiding mention of those airlines that are making losses despite enjoying government subsidies or bankruptcy protection).

From a business perspective, they'd all be better off if they flogged their assets and invested the proceeds in a savings account....

[bealine]

Forget the emotional "profit or greed" title - BA's first duty is to its investors who haven't received a dividend or any real share price growth for years! (Prior to Sept 11th 2001, the share value was 330 - today, even with the good news, the value is only 291) I don't often support our managment, but credit where it's due, they,ve done a fine job of turning our fortunes around and I suspect just a hint of jealousy coming from some sources!

The profits we're making are volatile and there's no doubt that our competitors are seeking ways to cover the increased costs! (Indeed, Continental have announced this week that they are reducing the International checked baggage allowance from 2 pieces at 32kg each to 2 pieces at 23kg each in order to reduce their fuel costs or obtain a contribution towards their kerosene!)

[Flap 5]

BA's first duty is to their customers. They are the ones who pay for the company to continue existing. The investors have put money in to shares in the company but that is a risk they take and they only do it if they feel there is a return to be gained, not because it is BA.

[Re-Heat]

Now on the Beeb site they announced a 36% earnings increase due to favourable exchange rates and increased fuel surcharges.

So is this journalistic hype or are BA being gready with their surcharges to make a profit?

Can't say - you need to breakdown the difference between revenue growth through increases in passengers, bawsic fares and general business growth, and growth in revenues through the surcharge that are unmatched to the fuel price levy.

I would say that are first glance that since the levy is designed to match the fuel price rises that it probably all goes directly on the fuel costs, and that the revenue growth comes through business growth alone. That is not innate belief in business, but rather that the levy would otherwise be unsustainable in the eyes of the consumer and that fuel prices have been rising such that such a surcharge doubtless is eaten away entirely by fuel prices.

BA's first duty is to their customers. They are the ones who pay for the company to continue existing.
Er - No. The customer may be right and business depend upon the customer, but you can ignore the customer and not be jailed as a director. Ignore the investor or mismanage the business as a director and you have the potential to go to jail.

I know what you mean - in good business sense - but it is neither a charity nor a cooperative.

From a business perspective, they'd all be better off if they flogged their assets and invested the proceeds in a savings account....
Probably true for many of the US airlines in this decade, however for BA the brand value that cannot be sold is probably worth far more than you might think - as it is for Virgin.

[yamaha]

GREED NOTHING BUT GREED

[ukeng]

Greedy profit, punters don't seem too unhappy though.
It's the final all-in price that matters most.
Don't think most shareholders care about a 1p or 2p divi and would much prefer to see the company grow and their share value increase?

[newswatcher]

Loco's have put their prices up as well, they just don't call the rises surcharges so no news headlines I think you would find Ryanair extremely miffed at your comment. On a £20 fare they add £5 tax, £4 PSC, and about £3 Insurance and (contentious?) wheelchair surcharge.

Can't really say whether they have up their fares overall, as their pricing is so variable!

[BA-BEANCOUNTER]

Have a look at the actual numbers published on bashares.com, you'll see that
Revenue increased by £150m, but fuel costs increased by £100m
This leaves £50m that has come from the increase in RPK's

The fuel surcharge has done it's job of covering the extra costs, rather than being a "greedy" way to con the public

[apaddyinuk]

Yamaha said...

GREED NOTHING BUT GREED

Actually, its more like...

SURVIVAL, NOTHING BUT SURVIVAL!!!!

[PAXboy]

I do like to see our national carrier do well Sorry - but they are NOT our national carrier. The UK does not have a national carrier.

BA is a public listed company, with a requirement (AFAIK) of a minimum 51% holding in British hands but that does not make it a national carrier. Only a nationalised airline could be so. They are the largest national carrier but nothing more. No offence intended to BA staff who do a great job (although I would insult some of the mgmt, given half a chance;) ).

--------------------
"I tell you, we are here on Earth to fart around, and don't let anybody tell you any different." Kurt Vonnegut, Jr.

[Final 3 Greens]

PAXboy

With a lineage that can be traced directly back to Imperial Airways, I believe that BA is rather more than our "largest" scheduled national carrier.

If you do a vox pox of fellow travellers and ask them who is the UKs flag carrier, I'd be surprised if less than 80% said BA, who generate a tremendous amount of goodwill for this country by providing a consistent level of professional service across a widespread and diverse route network (despite the odd issue)

On the other hand, we do also have......

Virgin (aka Singapore)
bmi (aka Lufty and SAS)
Flybe (short haul only)
easjyJet (short haul only)

All very good airlines, but not quite the same level of prestige IMHO.

So flag carrier status no, but definitely "old money" status around the world and whilst I don't like fuel surcharges, at least they are explicitly stated, so that if the price of oil does ever come down, punters can press for a reduction.

[PAXboy]

F3G Yes, agreed to all of that, with no dispute. BA gain enormous benefit in the way that the UK public (and others for all I know) view them and good luck to them for exploiting anything that keeps them in business. BUT they are not the national carrier!

Pedant? Moi?

[ZFT]

Providing the route isn’t a monopoly, BA (or any other carrier for that matter) can charge whatever they believe that particular route will sustain. Whether this is by surcharges or direct fares is really only down to marketing strategy.

Air travel is no different to any other business – maximise the returns for the shareholders. After all, this is exactly what the oil companies are doing, only they are also lining the coffers of the exchequer as well!!!.