Friday, British Airways Plc (BAY, BAY.L, BABWF.PK, BAIRY.PK), in its preliminary results, reported a loss for fiscal 2009, hurt by a slump in premium travel traffic, amid the bleak trading environment, as well as high fuel costs. With its debt nearly doubled and fiscal 2010 revenue outlook remaining weak, the company has cancelled its dividend for the year and refrained from providing guidance for the half-year or the full-year.
Chief Executive Willie Walsh commented, "Reduced passenger and cargo demand and high fuel prices last summer contributed to our £220 million operating loss as our total fuel bill reached almost £3 billion."
For the 12 months ended March 31, 2009, the company reported loss after tax of GBP 358 million, compared to a profit of GBP 726 million in the prior year. The company noted that the prior-year results were restated.
Loss attributable to equity holders of the parent amounted to GBP 375 million, versus last year's profit of GBP 712 million. Meanwhile, loss per share came up to 32.6 pence, reversing from the earnings of 61.4 pence per share last year.
Excluding a GBP 2 million loss from discontinued operations last year related to the BA Connect disposal, loss after tax from continuing operations totaled GBP 358 million or 32.6 pence per share, compared to the year-ago profit of GBP 728 million or 61.6 pence per share.
The company posted a pre-tax loss of GBP 401 million, turning around from a pre-tax profit of GBP 922 million reported in the previous year.
The company's revenue for the fiscal year 2009 rose 2.7% to GBP 8.99 billion from GBP 8.76 billion in the fiscal year 2008, including a GBP 109 million arising from a change in estimation basis for unused tickets. This is lower than its expectations of revenue growth to be up at least 4% year-on-year. On an underlying basis, excluding year-on-year exchange effects, revenue declined by 3.7%.
Revenue growth, which came mainly from Passenger Traffic revenue and Cargo revenue, was offset by an 11% decline in other revenues. During the year, Passenger Traffic revenue rose by 3.1% to GBP 7.84 billion and Cargo revenue increased 9.4% to GBP 673 million.
The full-service global airline's fourth-quarter loss before tax was GBP 331 million, on an 8.4% decline in group revenue, totaling GBP 1.9 billion, hurt by a 13.3% rise in operating costs. Passenger revenue declined 8%, on a 2.5% decrease in yields.
On an operating basis, total traffic, measured in revenue passenger kilometers or RPKs, was down by 3.4% at 114,346 million. Capacity, measured in available seat kilometers or ASKs, edged down by 0.7% to 148,504 million. Total passengers carried fell 4.3% to 33.12 million, with over 24 million passengers having being flown through Terminal 5. Overall load factor, or seat factor, was down by 2.1 points at 72%.
The company pointed out that the economic downturn impacted the global demand for premium travel, reflected by the 13% reduction in its premium traffic in the second half of the year. The company said it had to resort to significant pricing actions in order to stimulate non-premium traffic volumes, which were broadly unchanged year-on-year. Despite the fall in premium travel, the company was upbeat at its growing market share.
Capacity was also reduced by 3.1% in winter 2008 and 2.5% in summer 2009. A further capacity reduction of around 4% in the winter of 2009 are envisaged by the airline, which yet sees the delivery of new aircrafts to provide greater flexibility in its long haul fleet.
Although seat factor was down, yields grew by 6.7%, resulting from currency impacts. At constant exchange, passenger yields were broadly flat.
On its cost performance for the year, the company noted that it was dominated by fuel and oil costs, which jumped by 44.5% to nearly GBP 3 billion, as a result of a combination of fuel price increases and a weak sterling. Engineering and other aircraft costs were up 13.1% and Landing fees and en route charges grew by 14.2%. Non-fuel costs increased by 7.2%, and by 0.3% excluding the impact of exchange rates. Employee costs, excluding the GBP 78 million of restructuring-related costs, rose by 1.3%. The company noted that its overall manpower fell by over 2,500 compared with last summer.
As a result, the company posted an expected operating loss of GBP 220 million for fiscal 2009, versus an operating profit of GBP 878 million.
At March end, the company nearly tripled its cash balances to just under GBP 1.4 billion, but more-than-doubled its net debt to GBP 2.4 billion.
Regarding the proposed joint venture business with American Airlines and Iberia to operate transatlantic flights, Willie Walsh said that both the U.S. Department of Transportation and the European Union continue to assess its application for anti-trust immunity, and hopes the approvals to come through in the next six months.
The proposed all-share merger with Iberia was announced in July 2008, with management expecting the talks to take several more months to conclude. Further, in August 2008, the airline had agreed to seek regulatory approval for the one world alliance with American Airlines, a unit of AMR Corp. (AMR), and Iberia on flights between North America and Europe.
Looking ahead to the fiscal 2010, the company decided not to issue any new guidance for the half year and full year, citing the difficulty in forecasting revenues after seeing no improvements in current levels of traffic volume and yield.
Chairman Martin Broughton feels, "despite our best ever operational performance, any recovery is likely to take longer than initially envisaged. The revenue outlook continues to be weak during the current financial year, but we expect lower fuel prices to reduce our fuel costs by approximately £400 million. In light of this, the board is unable to recommend a dividend this year."
The company is also taking measures to curtail non-fuel costs. Besides the reduction in external spend and scrapping of management bonuses, the company has not planned for any base pay increases. The staff has also been given the option to go on unpaid leave and temporary or permanent part-time working. Discussions with trade unions are ongoing about pay and productivity changes.
BAY last traded on September 26, to close at $79.44, whereas BABWF.PK closed at $2.25 on May 13 and BAIRY.PK closed at $25.99 on May 21.
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