3rd Feb 2006 07:00
British Airways PLC03 February 2006 ENCOURAGING THIRD QUARTER RESULTS • Pre-tax profit of £164 million• Operating profit of £175 million• Operating margin at 8.2 per cent• Net debt at £2.2 billion British Airways today reported a pre-tax profit of £164 million for the threemonths to December 31, 2005 against a pre-tax profit of £151 million for thesame period last year. For the nine months, the pre-tax profit was £529 million (2004: £519 millionprofit). Operating profit for the quarter was £175 million (2004: £136 million). For thenine months, operating profit was £612 million (2004: £510 million). Theoperating margin for the quarter was 8.2 per cent, 1.3 points higher than last year. Willie Walsh, British Airways' chief executive, said: "These are encouragingresults which reflect better revenue and the continued efforts of our people tostrengthen the business. "Revenue is up 8.8 per cent, driven by strong traffic volumes particularly inthe premium cabin. Increased volumes have been achieved through significantpromotional activity. "Total costs are up by 7.3 per cent but we have initiatives underway to reversethe trend, such as management reductions, changes to working practices, reducedabsenteeism and restructuring unprofitable parts of the business. "Tackling our pension deficit is a major part of making our cost base morecompetitive. We have come to the end of a staff awareness programme on theimplications of the significant deficit and we are reviewing the feedback beforestarting consultation with the trades unions and trustees by the end of March. "We continue to develop and enhance our route network and products. Our newservices to Bangalore and Shanghai are both ahead of target, regional serviceswill be relaunched in March, six new European routes will soon start at LondonGatwick and in the summer we will unveil our £100 million investment in ClubWorld, our longhaul business class product." Martin Broughton, British Airways' chairman, said: "Some yield improvement isstill expected for this financial year. Consequently, revenue is now expected togrow by more than 8 per cent. Despite the improved revenue outlook, marketconditions remain broadly unchanged as significant promotional activity isrequired to maintain seat factors. "Underlying costs, excluding fuel, are now expected to be some one per centhigher than the guidance we gave at the beginning of the year, which was flat.Fuel costs continue to be a challenge for the industry, but our guidance isunchanged with total fuel costs expected to be up by £525 million this year. "Our focus remains on preparing for the move to Terminal 5 in 2008, investing inproducts for our customers and continuing to drive simplification to deliver acompetitive cost base." Group turnover for the third quarter at £2,129 million was up 8.8 per cent on aflying programme 3.7 per cent larger measured in available tonne kilometres(ATKs). This reflected the impact of increased passenger and cargo revenue andfuel surcharges. Passenger yields were down 1.5 per cent, measured in pence perrevenue passenger kilometres (RPKs). Seat factor was up 1.3 points at 74.1 percent on capacity 3.9 per cent higher measured in available seat kilometres(ASKs). For the nine month period, turnover improved by 8.4 per cent to £6,393 millionon a flying programme 2.5 per cent higher in ATKs. Passenger yields were up 0.5per cent with seat factor up 1.1 points at 76.5 per cent on capacity 2.5 percent higher in ASKs. For the quarter, unit costs were down 1.8 per cent on the same period last yearas a result of a net cost increase of 1.8 per cent on capacity 3.7 per centhigher in ATKs. The improvement in ATKS includes a 2 point increase due totemporary reductions in the flying programme in the third quarter last year. Total operating costs in the quarter increased by 7.3 per cent. Fuel costs rose28.2 per cent due to the increase in fuel price net of hedging, a stronger USdollar and a larger flying programme. Employee costs were up by 8.3 per cent as wage awards and higher pensioncontributions were only partially offset by manpower reductions. This includesa £10 million restructuring provision to support the first phase of themanagement restructuring programme announced in November 2005. Selling costs were up 7.8 per cent, largely due to additional promotional spendon new Indian services and the timing of new marketing campaigns. Borrowings, net of cash, short term loans and deposits, were £2,178 million atDecember 31, down £744 million since the start of the year. Cargo volumes for the quarter, measured in cargo tonne kilometres (CTKs), wereup 0.3 per cent compared with last year and yields, measured in cargo revenue perCTK, up 0.5 per cent. For the nine month period, cargo volumes were down 1.3 per cent,with yields up 2.4 per cent. ends February 3, 2006 010/KG/2006 Note to Editors • For all periods up to and including March 2005, British Airways has previously prepared its Group financial statements under UK Generally Accepted Accounting Practice (UK GAAP). • British Airways restated its 2004/05 accounts to International Financial Reporting Standards (IFRS). The restated accounts were published on July 4, 2005. All comparators referred to are based on these restated accounts. • At March 2005, the FRS17 accounting valuation of the airline's group pension schemes showed a deficit of £1.4 billion after tax (2004: £1.2 billion after tax). A webcast of British Airways' conference call to city analysts can be accessedvia the internet www.bashares.com - on Friday, February 3 at 2pm. Certain information included in these statements is forward-looking and involvesrisks and uncertainties that could cause actual results to differ materiallyfrom those expressed or implied by the forward looking statements. Forward-looking statements include, without limitation, projections relating toresults of operations and financial conditions and the company's plans andobjectives for future operations, including, without limitation, discussions ofthe company's Business Plan programmes, expected future revenues, financingplans and expected expenditures and divestments. All forward-looking statementsin this report are based upon information known to the company on the date ofthis report. The company undertakes no obligation to publicly update or reviseany forward-looking statement, whether as a result of new information, futureevents or otherwise. It is not reasonably possible to itemise all of the many factors and specificevents that could cause the company's forward looking statements to be incorrector that could otherwise have a material adverse effect on the future operationsor results of an airline operating in the global economy. Information on somefactors which could result in material difference to the results is available inthe company's SEC filings, including, without limitation the company's Report onForm 20-F for the year ended March 2005. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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