BA posts record losses as more strikes loom

The airline makes its worst loss since privatisation - and further disruption is on the way...

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Last Updated: 31 Aug 2010

They say no PR is bad PR, but with British Airways hitting the headlines again today for the third time this week, we’re not sure that’s entirely true. BA has announced record losses of £531m this year, up from last year’s £401m losses, with revenues dropping by £1bn. Chief executive Willie Walsh says cost-cutting measures are working – but with fierce opposition from unions, and even fiercer opposition from a certain Icelandic volcano, it looks like it’s going to be a determinedly turbulent year for BA…

Walsh is blaming the figures squarely on ‘the biggest economic downturn in 60 years’, but other factors are also involved: strikes in March and narrowly-averted strikes in December are sure to have contributed to the losses, as is aggressive competition by the airline’s budget rivals. And while the figures haven’t factored in those pesky ash-cloud groundings, which are estimated to have lost the airline around £20m a day, let’s not forget December’s freezing weather, which grounded flights as well.

Investors, though, have remained reasonably bullish about the situation. Analysts expected the losses to be much worse – with the potential for a pre-tax loss of about £600m. As well as the losses, BA has been able to announce cost savings of £390m, helped, no doubt, by a £597m drop in the airline’s fuel bill. In fact, so impressed are the markets that BA’s share price is actually up by nearly 2%, perhaps helped by the fact that the airline expects to break even this year. As businesses move out of recession, take-up of its crucial transatlantic business-class flights is predicted to grow by 6%.

But three lots of five-day strikes by BA’s cabin crew, due to start next week, are going to put a bit of a downer on things. After a ‘dramatic’ (or ‘deeply petty’, depending on how you want to look at it) battle in the High Court this week over whether the Unite union should have tweeted the result of its latest strike ballot or not (on balance, we’re settling for the latter), the union eventually won the squabble. Er, battle. While Unite union joint leader Derek Simpson used his appearance on this morning’s Today programme to accuse Walsh of ‘bullying tactics’ after he vowed to continue BA’s cost-cutting programme,  BA can’t afford to keep losing £500m a year –  the two sides are going to have to come to an agreement soon, or everyone risks losing. 

But until that happens, with the union now threatening ‘guerilla’ strikes if BA manages to prevent any more, and that volcano still spewing out ash, we think we’ll be opting for a couple of weeks in Cornwall this year…

 

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