Tuesday, January 27, 2009

British Airways Gives Warning of Operating Loss

British Airways, the 3rd biggest European airline, has given a profit warning that they expect to have an operating loss of around £150 million for the year amid the decline of demand for air travel. The airline stated that the further weakening of the economy during January, as well as the outlook for the next 2 months and the fall of the pound, are deteriorating their outlook.

Non-fuel costs are specifically seen increasing by 8% in comparison to the 5% rise that was forecasted earlier. With exchange rates as they are now, British Airways anticipates to report an operating loss for this year amounting to £150 million. Revenue, however, is still increasing by 4% for the year, their volume is in line with expectations, and the forecast for their fuel bill is still set to be £3 billion. The company’s 3rd quarter, which ended December 31st, is expected to show results of a £50 million loss, but this is still to be announced on February 6th.

The value of the pound against the United States dollar has fallen from a high of $2 during the summer to less than $1.40 with worries about the struggling financial institutions and mounting debt in Great Britain. British Airways isn’t the only airline that is struggling to make a profit, however, amid the weakening demand during the global recession.

Specifically, the traffic for premium seating has been declining while companies are cutting down on corporate travel in order to cut costs. The International Air Travel Association said earlier in the month that premium air traffic around the world dropped by 11.5% during November, which came after decreases during September and October as well.