BA set to announce very large loss
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BA set to announce very large loss
Source <a href="http://luchtvaart.pagina.nl" target="_blank">latest news</a> . . . .British Airways will report one of the biggest quarterly losses in its history on Monday, as the airline discloses the full impact of the drastic decline in demand for air travel that followed the September 11 terrorist attacks in the US.
Despite having one of the weakest balance sheets among the leading European airlines, BA is not expected to launch a rights issue in the near future, however.
According to bankers and financial analysts, BA is not in immediate need of funds, having moved quickly to strengthen its cash position in the weeks after September 11.
"BA has more than ample liquidity to see it through this downturn, so there is no need to do anything quickly," said Chris Avery, aviation analyst at JP Morgan. "It is not under pressure, so it can choose the timing. It is better for it to sit on its hands and wait for an improvement in the market."
BA raised close to an extra £1bn ($1.4bn) of liquidity during the seven weeks after September 11, giving it total liquidity of around £3.4bn including around £1.1bn in cash and unused bank facilities of more than £800m. It also had marketable assets of about £1.5bn.
BA has already suffered the blow of being downgraded by both Moody's and Standard and Poors, the US rating agencies, to junk from investment grade two months ago.
It is rated Ba1/BB+, the highest speculative grade, by both agencies. The downgrading hit around $940m of BA debt securities adding to the airline's borrowing costs.
The airline is expected to launch an eventual share issue later this year to help rebuild its battered balance sheet, but not until it can show signs of a marked recovery in business travel across the North Atlantic, its key market and traditionally its main generator of profits.
BA shares closed 8p or 3.9 per cent higher on Friday night at 212½p, as investor confidence was improved by reports from airlines on both sides of the Atlantic that the worst of the aviation crisis may be over.
KLM, the Dutch national airline, reported on Thursday a "noticeable improvement" in trading during the past two months as well as a continuing favourable trend in advance bookings.
Ominously for BA's recovery prospects, however, KLM also said announced that it had decided to reduce business class capacity and to increase the number of economy class seats in response to the decline in demand for business travel.
BA has built its strategy around gaining a growing share of lucrative business passengers, but KLM said "We see a structural reduction in business class travel in Europe. We don't think this is coming back."
The consensus forecast for BA's third quarter result is an operating loss of £225m, down from an operating profit of £80m a year ago, and for a pre-tax loss of £230m, down from a profit of £65m.
The airline has already reported that its traffic fell steeply by 18 per cent in the three months October to December, while capacity was cut by only 14 per cent, meaning that the airline filled only 65.2 per cent of available seats, down from 68.3 per cent.
Most worryingly for its financial performance, premium traffic fell by 27.3 per cent in the quarter compared with a fall of 16.2 per cent in non-premium traffic.
In the wake of its results BA is due to announce in the next two weeks the result of its far-reaching "Future Size and Shape" review that is expected to lead to a restructuring of its operations aimed at achieving sustainable profitablity and to overcome this year's record losses.
It is expected to take action to eliminate loss-making routes and products, to cut costs, including several thousand job losses, and to reduce capacity to stem years of losses on its short-haul operations in Europe.
Despite having one of the weakest balance sheets among the leading European airlines, BA is not expected to launch a rights issue in the near future, however.
According to bankers and financial analysts, BA is not in immediate need of funds, having moved quickly to strengthen its cash position in the weeks after September 11.
"BA has more than ample liquidity to see it through this downturn, so there is no need to do anything quickly," said Chris Avery, aviation analyst at JP Morgan. "It is not under pressure, so it can choose the timing. It is better for it to sit on its hands and wait for an improvement in the market."
BA raised close to an extra £1bn ($1.4bn) of liquidity during the seven weeks after September 11, giving it total liquidity of around £3.4bn including around £1.1bn in cash and unused bank facilities of more than £800m. It also had marketable assets of about £1.5bn.
BA has already suffered the blow of being downgraded by both Moody's and Standard and Poors, the US rating agencies, to junk from investment grade two months ago.
It is rated Ba1/BB+, the highest speculative grade, by both agencies. The downgrading hit around $940m of BA debt securities adding to the airline's borrowing costs.
The airline is expected to launch an eventual share issue later this year to help rebuild its battered balance sheet, but not until it can show signs of a marked recovery in business travel across the North Atlantic, its key market and traditionally its main generator of profits.
BA shares closed 8p or 3.9 per cent higher on Friday night at 212½p, as investor confidence was improved by reports from airlines on both sides of the Atlantic that the worst of the aviation crisis may be over.
KLM, the Dutch national airline, reported on Thursday a "noticeable improvement" in trading during the past two months as well as a continuing favourable trend in advance bookings.
Ominously for BA's recovery prospects, however, KLM also said announced that it had decided to reduce business class capacity and to increase the number of economy class seats in response to the decline in demand for business travel.
BA has built its strategy around gaining a growing share of lucrative business passengers, but KLM said "We see a structural reduction in business class travel in Europe. We don't think this is coming back."
The consensus forecast for BA's third quarter result is an operating loss of £225m, down from an operating profit of £80m a year ago, and for a pre-tax loss of £230m, down from a profit of £65m.
The airline has already reported that its traffic fell steeply by 18 per cent in the three months October to December, while capacity was cut by only 14 per cent, meaning that the airline filled only 65.2 per cent of available seats, down from 68.3 per cent.
Most worryingly for its financial performance, premium traffic fell by 27.3 per cent in the quarter compared with a fall of 16.2 per cent in non-premium traffic.
In the wake of its results BA is due to announce in the next two weeks the result of its far-reaching "Future Size and Shape" review that is expected to lead to a restructuring of its operations aimed at achieving sustainable profitablity and to overcome this year's record losses.
It is expected to take action to eliminate loss-making routes and products, to cut costs, including several thousand job losses, and to reduce capacity to stem years of losses on its short-haul operations in Europe.
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I have a feeling it might even be worse than expected. If you look at the other european airlines, they seem to be doing better. Especially the ones that have alliances, openskies ans antitrust immunity with the US. Until you are able to fully tap into the potential passengers in the worlds largest market--the USA, I dont see much hope for a sustainable recovery for BA. No hope at all. I just wonder if Rod Eddington will be dismissed before this comes to pass. If so it might bring new blood, on the other hand BA will lose more time in gaining a full fledged, sustained recovery. Just my 2 cents worth.
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While I feel really sorry for those affecte at BA, I dont feel that sorry. Inept accounting practices (on a dub-lhr-jfk in J the dub-lhr for £1) and an oversized managment that they will not cull means this is something of thier own making. I dont doubt their strategy towards profitability but it was based whether they accept it or not, on maintaining a quadropoly at LHR. These routes are highly profitable to AA and UA, even more so than VS/BA. They dont have flat beds and butler service, they offer the same crap they do on all other routes. But they charge £5000 for LHR rtn instead of £2800 at CDG/FRA. What does BA do, it needs the alliance with AA to cut cost and make it competitive with the Star Alliance, but it needs to maintain its prices. Branson will have the same problem of course, however he is ready to become part of the *A throught his partnership with SQ, and even more importantly he has a smaller and I believe now the classics have gone the way of the norwegian blue newer fleet. He is already adapting to the neww market conditions, not by removing J class seats a la KLM but removing low yield eco seats and installing more premium economy seats. The business dynamic has changed and companies arent paying the mega costs any more, at the same time they arent going to subject thier employees to the torture of economy.
BA should have said yessir to the DOT, I dont think they will get a third chance. And dont write of BMI
BA should have said yessir to the DOT, I dont think they will get a third chance. And dont write of BMI
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Carduelis,
I am sure that there will be a massacre later this month, but I am equally sure that the only staff out the door will be direct frontline staff. The same old story - the ratio of direct to nondirect will keep on getting worse and the senior management will sit in Waterworld congratulating themselves on a job well done.. . <img src="mad.gif" border="0"> <img src="mad.gif" border="0">
I am sure that there will be a massacre later this month, but I am equally sure that the only staff out the door will be direct frontline staff. The same old story - the ratio of direct to nondirect will keep on getting worse and the senior management will sit in Waterworld congratulating themselves on a job well done.. . <img src="mad.gif" border="0"> <img src="mad.gif" border="0">
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If BA's management see fit to slash further their front line staff leaving the management and offices untouched then I for one will be happy to take my redundancy and go.. .The thing is Future Size and Shape has to be a broad set of guidlines of where the company needs to be between 5 and 10 years time. It has to guide the various departments towards that aim. How can it give specifics for each department to do.
I do hope that it will all appear sensible but I'm not holding my breath. Although regardless of what people think I feel that BA by taking longer to consider it's plan and not doing anything major yet has given itself time to consider all the options and so hopefully what it decides to do will be good for the long term future, not just the short term balance sheet to please a few accountants.
Also the news that BA will make it's biggest quarterly loss in it's history is not exactly great insight seeing as I undeerstand it BA hasn't made a loss yet in it's short history.
. .[ 03 February 2002: Message edited by: mainfrog2 ]
[ 03 February 2002: Message edited by: mainfrog2 ]</p>
I do hope that it will all appear sensible but I'm not holding my breath. Although regardless of what people think I feel that BA by taking longer to consider it's plan and not doing anything major yet has given itself time to consider all the options and so hopefully what it decides to do will be good for the long term future, not just the short term balance sheet to please a few accountants.
Also the news that BA will make it's biggest quarterly loss in it's history is not exactly great insight seeing as I undeerstand it BA hasn't made a loss yet in it's short history.
. .[ 03 February 2002: Message edited by: mainfrog2 ]
[ 03 February 2002: Message edited by: mainfrog2 ]</p>
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exeng,
[quote] What you suggest flies in the face of all the recent evidence <hr></blockquote>
I am not sure what part of the airline you work in exeng, but in my bit I have yet to see any 'evidence'
Judging by the comments you have made on other threads in this forum I assume you are part of the management team and therefore part of the problem.
Also I do not want the airline to fail, far too many peoples security depend on BA succeeding, it is just that time and again I have seen excellent staff working hard to make a quality product fail due to incompetant mangement.
At BA we have an excellent team who want to succeed, just get the managers off our backs.
[quote] What you suggest flies in the face of all the recent evidence <hr></blockquote>
I am not sure what part of the airline you work in exeng, but in my bit I have yet to see any 'evidence'
Judging by the comments you have made on other threads in this forum I assume you are part of the management team and therefore part of the problem.
Also I do not want the airline to fail, far too many peoples security depend on BA succeeding, it is just that time and again I have seen excellent staff working hard to make a quality product fail due to incompetant mangement.
At BA we have an excellent team who want to succeed, just get the managers off our backs.
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Jet II
Part of what I heard is reported in the Sunday Times today, with 16,000 mentioned in the St Valentines Day events. BA News comes out on a Thursday!. .The article 'poo-pooed' the suggestion of a new BOAC, but, in my opinion, if all goes well with KL, then I reckon that could happen for BA running long haul, and KL (AirUK, etc!) running a new BEA. Well, I can dream!
With all those cuts, I personally feel that one of the BA Directors may also say goodbye - in sym-athy!
Part of what I heard is reported in the Sunday Times today, with 16,000 mentioned in the St Valentines Day events. BA News comes out on a Thursday!. .The article 'poo-pooed' the suggestion of a new BOAC, but, in my opinion, if all goes well with KL, then I reckon that could happen for BA running long haul, and KL (AirUK, etc!) running a new BEA. Well, I can dream!
With all those cuts, I personally feel that one of the BA Directors may also say goodbye - in sym-athy!
Mistrust in Management
Jet11,
You assume I am a part of the management team. Well that should make a few folk around here chuckle.
What I was trying to suggest to you is that there is a lot of recent evidence to suggest that BA are finally starting to 'grasp the nettle'. (Several different newspaper articles)
It probably isn't evident yet in your bit, nor is it particularly evident in my little bit - yet.
I know there are significant cuts going on in Waterside right now; people are being hoofed out as we speak.
. .Regards. .Exeng
You assume I am a part of the management team. Well that should make a few folk around here chuckle.
What I was trying to suggest to you is that there is a lot of recent evidence to suggest that BA are finally starting to 'grasp the nettle'. (Several different newspaper articles)
It probably isn't evident yet in your bit, nor is it particularly evident in my little bit - yet.
I know there are significant cuts going on in Waterside right now; people are being hoofed out as we speak.
. .Regards. .Exeng
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If the 17,000 jobs were carefully chosen from the right areas then you would see no difference whatsoever to the product, except that it would improve significantly, the profits would surge, and the yields, and the revenue, and the share price whilst the costs fall.
BA turns over £9bn a year of which £3bn is staff costs. Sack 17000 out of 63000 (yes, it is still 63000 because the 7200 ‘Man power equivalents’ that were announced last year are all still employed on full pay and in fact is likely to be closer to 6500) that suggests to me an immediate saving of £809m. Together with the improved efficiency of less people interfering with the smooth running of the operation and I think those savings could easily reach £1bn.
At the very foundation of BA the core assets are the slots they own at LHR and to a lesser extent LGW. Any retreat from shorthaul on the scale forecast by the ‘return to BOAC’ scenario would entail surrendering many hundreds of slots that would no longer be used and hence by statute be required to be surrendered. Since only days ago we suggested that 224 slots was too high a price to pay for a strategy that some believe would have been this company’s salvation, then it would hardly be consistent to give hundreds more away in the Future Size and Shape review.
I can only deduce that the horror stories of Armageddon for pilots and cabin crew are being circulated by those who are shortly to find themselves on the street. They are apparently acutely aware that the commercial world has no place for Paper Fastening Systems executives, Pot Plant Position Psychics, Cappuccino Consumption Consultants and Management Structure Management Systems managers.
I personally hope that at last we might finally have realised at the eleventh hour the error of our ways, and the FSS review will be the referral for major surgery that we need to remove these malignant cancerous people from our midst and set us on the road to recovery. Every fellow employee I speak to seems to know what’s wrong and what is required to fix it. I can’t believe that the five wisest men in the company could be uniquely myopic.
Good luck everyone. <img src="rolleyes.gif" border="0">
. .edited for bile and vitriol
[ 03 February 2002: Message edited by: Roobarb ]</p>
BA turns over £9bn a year of which £3bn is staff costs. Sack 17000 out of 63000 (yes, it is still 63000 because the 7200 ‘Man power equivalents’ that were announced last year are all still employed on full pay and in fact is likely to be closer to 6500) that suggests to me an immediate saving of £809m. Together with the improved efficiency of less people interfering with the smooth running of the operation and I think those savings could easily reach £1bn.
At the very foundation of BA the core assets are the slots they own at LHR and to a lesser extent LGW. Any retreat from shorthaul on the scale forecast by the ‘return to BOAC’ scenario would entail surrendering many hundreds of slots that would no longer be used and hence by statute be required to be surrendered. Since only days ago we suggested that 224 slots was too high a price to pay for a strategy that some believe would have been this company’s salvation, then it would hardly be consistent to give hundreds more away in the Future Size and Shape review.
I can only deduce that the horror stories of Armageddon for pilots and cabin crew are being circulated by those who are shortly to find themselves on the street. They are apparently acutely aware that the commercial world has no place for Paper Fastening Systems executives, Pot Plant Position Psychics, Cappuccino Consumption Consultants and Management Structure Management Systems managers.
I personally hope that at last we might finally have realised at the eleventh hour the error of our ways, and the FSS review will be the referral for major surgery that we need to remove these malignant cancerous people from our midst and set us on the road to recovery. Every fellow employee I speak to seems to know what’s wrong and what is required to fix it. I can’t believe that the five wisest men in the company could be uniquely myopic.
Good luck everyone. <img src="rolleyes.gif" border="0">
. .edited for bile and vitriol[ 03 February 2002: Message edited by: Roobarb ]</p>
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Roobarb,
whilst I agree with you 100% I think you are going a bit far with the:
[quote] malignant cancerous people <hr></blockquote>
the managers and consultants at BA also have families and although we may think they are not needed I am sure that they think they are doing a wonderful job!
whilst I agree with you 100% I think you are going a bit far with the:
[quote] malignant cancerous people <hr></blockquote>
the managers and consultants at BA also have families and although we may think they are not needed I am sure that they think they are doing a wonderful job!
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From Encarta on-line as I don’t have an OED to hand.
malignant [mal'gnant ] adjective . .- likely to cause death: used to describe a disease or condition that is liable to cause death or serious disablement unless effectively treated
cancer [kánssr ] (plural cancers) noun . . - fast-spreading bad phenomenon: something, usually something negative, that develops or spreads quickly and usually destructively
Fair do’s. Whilst I wish them no hardship personally (and incidentally not to any cancer patients in case anyone thought so), it would be far worse if the company went bust and we all found ourselves redundant. But looking more closely, the kind of people that we speak of have no long-term loyalty to Big Airways. It’s merely another corporate scalp on the CV to get them to the next job. The rest of the UK economy is not suffering the same malaise as BA, and I’m sure if they’re as good as they say they are they should find positions quickly. Knowing this country’s penchant for rewarding failure spectacularly, they will probably look forward to a bright and prosperous future. After all, look at Ayling Bob.
malignant [mal'gnant ] adjective . .- likely to cause death: used to describe a disease or condition that is liable to cause death or serious disablement unless effectively treated
cancer [kánssr ] (plural cancers) noun . . - fast-spreading bad phenomenon: something, usually something negative, that develops or spreads quickly and usually destructively
Fair do’s. Whilst I wish them no hardship personally (and incidentally not to any cancer patients in case anyone thought so), it would be far worse if the company went bust and we all found ourselves redundant. But looking more closely, the kind of people that we speak of have no long-term loyalty to Big Airways. It’s merely another corporate scalp on the CV to get them to the next job. The rest of the UK economy is not suffering the same malaise as BA, and I’m sure if they’re as good as they say they are they should find positions quickly. Knowing this country’s penchant for rewarding failure spectacularly, they will probably look forward to a bright and prosperous future. After all, look at Ayling Bob.
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Roobarb
You have hit the nail directly on the head with all of your comments. I have now given up and after many years know that no matter how many FSS's or BEP's they dream up only a few management jobs go and behold several months later are readvertised ready to promote another wannabe to their own comfortable level of incompetence....
Low cost base for LGW....we don't stand a chance seen it all before..I'm off.
You have hit the nail directly on the head with all of your comments. I have now given up and after many years know that no matter how many FSS's or BEP's they dream up only a few management jobs go and behold several months later are readvertised ready to promote another wannabe to their own comfortable level of incompetence....
Low cost base for LGW....we don't stand a chance seen it all before..I'm off.
Again Roobarb has eloquently expressed what many of us feel.. .I am rather more hard hearted and have no sympathy at all for the miserable incompetants responsible for the current sad position in which BA finds itself.. .Let's hope that Exeng is right and at last some sense is being seen.. .Time for some serious thinning down. These bean counters have ruined enough good people, now it's their turn to face the axe.
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Excellent post Roobarb - BA desperately need to rid themselves of these AbFab style meandering 'managers' - the list of types you portray are endless <Manager of breadrolls Benebecula etc....> .
Airlines need airline people - that have a thorough understanding of the job and the real desire for all it entails.
They need to motivate and develop their frontline staff, not cutback on them - these are the people who bought huge success to the airline during the 90's, and are more than willing to do it again.
It is your frontline staff who do most for your company in times like these - grab the opportunity.
The company doesn't need focus groups/sheng fui waterworld meetings/3hr coffee breaks .
It's passengers however need to be well looked after in an enviroment/style that is synonymous to their onboard wishes.
As for Gatwick , Go ahead and Good luck .
Airlines need airline people - that have a thorough understanding of the job and the real desire for all it entails.
They need to motivate and develop their frontline staff, not cutback on them - these are the people who bought huge success to the airline during the 90's, and are more than willing to do it again.
It is your frontline staff who do most for your company in times like these - grab the opportunity.
The company doesn't need focus groups/sheng fui waterworld meetings/3hr coffee breaks .
It's passengers however need to be well looked after in an enviroment/style that is synonymous to their onboard wishes.
As for Gatwick , Go ahead and Good luck .