It says something about the recent woes of British Airways when a quarterly loss of £50m counts as a pleasant surprise. But so it was today, as BA reported a much smaller loss than the £122m it made this time last year (or the £150m analysts were expecting). CEO Willie Walsh said this was largely due to the double-digit drop in operating costs he’s been able to squeeze out of the airline lately. On the other hand, he was also quick to point out that BA is still £342m in the red for the first nine months of its financial year, and remains on course for a record full-year loss. As he tools up for yet another barney with the unions over possible strike action, numbers like these actually strengthen his negotiating position…
Believe it or not, BA actually made a profit at operating level last quarter (of £25m) – the first time it’s done so in 15 months. Walsh said this was because the airline had managed to cut operating costs by almost 11%, partly via lower fuel costs, and partly because of savings from its ongoing restructuring programme – including management redundancies, lower supply costs, capacity cuts, and lower pay for pilots. However, Walsh wasn’t exactly jumping for joy. ‘While we are on the right track, we still expect to make record losses this year. Permanent structural change is being introduced in all areas and will return us to sustained profitability,’ he sniffed today.
It’s true that BA still has plenty to worry about. Even if the worst may be over, passenger numbers were down 8% again in January. Its proposed three-way merger with Iberia and American Airlines is still up in the air (so to speak), awaiting regulatory approval. Its pension deficit has now soared to an eye-watering £3.7bn, which just isn’t sustainable. And his controversial plans to cut cabin crew numbers and wages is still getting short shrift from the unions; Unite is currently talking about possible strike action around Easter time, which can’t be doing BA’s advance bookings any good.
So in some ways, it’s no wonder that Walsh isn’t trumpeting the fact that today’s figures were a lot better than expected. After all, when he heads for the negotiating table, it’s much easier for him to make the case that these changes are essential (and long-overdue) at a time when BA is reporting record losses. And this is a negotiation he really can’t afford to lose.
In today's bulletin:
British Airways' latest losses 'only' £50m
Waitrose sales up 15% in the last six months
Another 4,500 companies go bust in Q4
Exclusive MT survey: We're getting a fair deal from our banks, say SMEs
Psychology at Work: Time for some optimism