Friday, British Airways Plc (BAY, BAY.L) reported a net loss for the nine-month period, negatively impacted by sharply higher fuel costs and lower travel volumes, despite foreign exchange benefits. Further, the company maintained its fiscal 2009 revenue growth forecast, and said it sees an operating loss for the year. Separately, the British airline announced a drop in overall load factor for the month of January, with 2.6% decline in passenger capacity and 1.3% drop in traffic.
For the nine months ended December 31, 2008, net loss totaled GBP 127.0 million or 12.0 pence per basic share, compared to a profit of GBP 642 million or 54.9 pence per basic share in the comparable period last year. The company noted that the prior-year results were restated to reflect the adoption of IFRIC 13 and 14 on April 1, 2008.
In the period, pre-tax loss was GBP 70.0 million, compared to a profit before tax of GBP 816.0 million last year.
British Airways' revenues rose 6.2% to GBP 7.05 billion from GBP 6.63 billion a year ago, helped by significant support from currency which more than offset volume declines. Passenger revenue rose 6.6% from last year to GBP 6.2 billion. Passenger capacity, measured in Available Seat Kilometres, or ASKs, edged up 0.2%.
Passenger revenue per Revenue Passenger Kilometres, or RPKs, were up 9.6% to 6.95 pence from 6.34 pence last year, helped by a 4.2% benefit from exchange, price increases of 5% and a positive mix impact of 0.4%. Price increases included a 1.4% benefit from a change in estimation basis for outdated tickets.
The company's seat factor was down 2.3 points to 78.4%, as the current economic downturn continues to impact volumes.
In the cargo business, nine-month results were strong, with 18.8% rise in revenue to GBP 537 million. Volume, measured in cargo tonne kilometers, or CTKs, dropped 1.7%, driven by a significant softening in the last quarter, offset by yield improvements due to exchange and fuel surcharge increases.
In the nine-month period, the company's operating profit plunged 88% to GBP 89 million from GBP 744 million a year earlier.
Total group operating costs climbed 18.1% to around GBP 7 billion, mainly due to 20.4% higher unit costs on the dramatic increase in fuel costs and weakening sterling. Fuel costs surged 48.4% year-over-year to GBP 2.24 billion, despite a fuel hedging profit of GBP 194 million, reflecting the collapse of sterling against the US dollar. The average market price of fuel, measured in US dollars, was up 40.7% from last year.
Commenting on the results, British Airways' chief executive Willie Walsh, stated, "These results have been hit by further economic weakness and the fall in sterling. This has resulted in an operating profit of £89 million. We have already taken several actions to offset the unprecedented economic conditions. We have increased our sales activity in markets with stronger foreign currencies to benefit from exchange and continue to offer competitive fares in both premium and non-premium cabins."
Looking ahead, British Airways said that its revenue guidance for the year remains unchanged as being up at least 4% year on year, with yields benefiting from exchange more than offsetting volume declines. Traffic volumes are expected to remain in line with the market. The company projects an operating loss of around GBP 150 million for the year.
The company, which in December last year had ended its merger talks with Australian air carrier Qantas Airways Ltd. (QUBSF.PK, QAN.AX), said the industry continues to face very difficult trading conditions on the back of a weak economic environment. Fuel bill for the year is still expected to be some GBP 3 billion for the company, with benefit from falling fuel prices going into next year.
Non-fuel costs are now expected to rise 8%, compared to previous forecast of 5%, including the impact of restructuring costs and exchange. Capital guidance is maintained at GBP 550 million.
Further, British Airways said that significant cost reduction is needed in the current weak economic environment, as revenue growth will be difficult. The company noted that it has opened discussions with the trade unions about pay and productivity, which is required to improve the financial performance of the company.
The airline also announced a new environmental target of halving net CO2 emissions by 2050, which means British Airways will reduce its net carbon output from 16 million tonnes in 2005 to eight million by mid-century.
In a separate press release, the company announced that its January 2009 overall load factor dropped 1.3 points to 67.7% from 69.0% in the previous year.
Passenger capacity, or ASKs fell 2.6% to 12.13 billion from 12.45 billion a year ago. Traffic, measured in RPKs, dropped 1.3% to 8.88 billion from 8.99 billion in the same period a year earlier. Traffic comprised a 13.7% decrease in premium traffic and a 1.4% rise in non-premium traffic.
Passenger load factor increased 1.0 points to 73.2% from 72.2% last year. Total passengers carried in the month were 2.33 million, down 4% from 2.42 million a year ago.
Cargo, measured in CTKs, in January fell 16.7% to 325 million, and total Revenue tonne km, or RTK, declined 5.8% to 1.23 billion from 1.30 billion last year.
BAY last traded on September 26 at $79.44.
BAY.L is currently trading on the LSE at 131.40 pence or 3.80 pence or 2.98%, on a volume of 5.9 million shares.
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