BA back in the black for the first time in two years

The beleaguered airline has made a £158m profit, beating expectations. But there are still unresolved items on CEO Willie Walsh's to-do list...

by Emma Haslett
Last Updated: 29 Oct 2010
Could this finally be the end of British Airways’ annus horribilis? The airline has finally reported that it’s back in the black today, after two years of losses. The company has managed to smash expectations with a profit of £158m in the six months to September, more than twice the £75m analysts had forecast – impressive, considering the strikes (and natural disasters) it’s had to contend with this year. The figures will no doubt come as good news to Iberia, with whom BA is about to announce a tie-up, but that doesn’t mean it’s all plain sailing from here on in: CEO Willie Walsh used the opportunity of the results to bring up aviation taxes, which are about to go up – and there’s still the small matter of an unhappy cabin crew to contend with.

That pre-tax profit is an impressive u-turn from this time last year, when BA made a loss of £292m. And that’s not all that was up: revenues have jumped by a whopping 84% in the last six months, to £4.4bn, shored up mostly, according to the airline, by a 39% rise in cargo revenues – although it added that first- and business-class seats, the most profitable side of its passenger operation, are beginning to sell again, too. Part of that revenue, though, is down to the fact it has managed to cut its ‘non-fuel costs’ by 1.5% (although fuel costs were up by 2.4%).

But Walsh was quick to warn that a rise in air passenger duty scheduled for next week could put paid to all BA’s hard work. The duty, which the Government says will ‘reflect’ the cost of carbon emissions by the aviation industry, will increase by up to 55% on some of the longest flights – much to BA’s consternation. In its statement, it pointed out that ‘we already meet our carbon costs twice over even before these increases’, and that the industry supports more than 500,000 jobs in the UK and ‘provides the transport links that are vital to the success of UK businesses in a globalised economy. Excessive taxation puts aviation’s social and economic benefits at risk’. A fairly direct criticism of the Coalition, however you look at it.

Despite a relatively strike- and natural disaster-free few months, Walsh’s to-do list still looks full. While the shareholder vote next month to cement the tie-up with Iberia should go pretty smoothly, there is still the chance that the 13,000-odd cabin crew represented by the Unite union won’t accept the conditions surrounding a renewed offer, which pledges a 2.9% pay rise next year and a 3% rise in 2012, plus reinstated travel perks, as long as the union promises not to strike for the next three years. How that will go down with the union is anyone’s guess – but the results of a ballot taken this week are due to be announced mid-November, so it looks like BA will have to wait until then to find out.

Nevertheless, after all the turmoil Walsh et al have faced over the past year, these results will come as nothing less than a relief to management. Time for a holiday, perhaps?

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