2nd Feb 2007 07:01
British Airways PLC02 February 2007 MIXED RESULTS • Operating profit of £129 million (down £47 million)• Pre-tax profit of £113 million (down £53 million)• Operating margin at 6.2 per cent• Revenue from continuing operations up 0.5 per cent British Airways today reported an operating profit of £129 million for the threemonths to December 31, 2006 (2005: £176 million). For the nine months, theoperating profit was £571 million (2005: £596 million). The operating margin forthe quarter was 6.2 per cent, 2.4 points lower than last year. Pre-tax profit for the quarter was £113 million (2005: £166 million). For thenine months, pre-tax profit was £584 million (2005: £518 million). Theseresults have been restated to show the business on a continuing basis, excludingBA Connect, following the decision to dispose of the regional business to Flybe. Willie Walsh, British Airways' chief executive, said: "These are mixed resultswith costs up 3 per cent reflecting higher fuel costs and revenue up 0.5 percent to £2.1billion. "Our drive on costs continues ahead of our move to Terminal 5. Fuel remains asignificant burden with costs in the quarter up 11.2 per cent. We remaincommitted to achieving our cost reduction target of £450 million and a 10 percent operating margin by March 2008. "Revenue has been hit by a raft of external factors. These include thecontinued impact of the August security measures. Common EU baggage standards onliquids were not agreed until mid-way through the quarter and more restrictiverules on hand baggage continue to apply in the UK. As a result, transfervolumes at Heathrow are still down. The baggage system operated by the BAA atHeathrow's Terminal 4, failed twice in December and severe fog led to thecancellation of 800 flights in the pre-Christmas peak period. The impact of allthese external factors in the quarter is estimated at £40 million. "The patience and loyalty of our customers has been tested and I want toapologise for the inconvenience they have suffered during this period. Theuncertainty caused by the threat of recent industrial action has added to thisbut we have reached an agreement with the cabin crew branch of the T&G over arange of issues which I am confident forms the basis of a good relationship inthe future. We are now re-focusing on customer service to win back theconfidence and trust of our customers. "On pensions, we are delighted that the BA Forum, which represents BritishAirways' unions, recently issued a statement recommending acceptance of thechanges in benefits to tackle the £2.1 billion deficit in the New AirwaysPension Scheme (NAPS). This is a major milestone and we can now move forward onour plans for fleet renewal and replacement. "We are now flying our new Club World on four aircraft and the embodimentprogramme is on schedule for completion by summer 2008. Feedback from ourcustomers has been fantastic. They love the extra comfort, space andflexibility of the new flat bed and our greatly enhanced in-flight entertainmentsystem." Martin Broughton, British Airways' chairman, said: "The market continues to showgood demand in premium cabins. The weakness in some non-premium segments is alsostill a feature. The revenue outlook for the fourth quarter has been impacted bythe threat of industrial action. While the strike was averted, the estimatedrevenue loss is still some £80 million. Revenue guidance for the full year isnow 3.25 - 3.75% growth. "While cost control remains strong, full year costs excluding fuel are expectedto be some £50 million higher than last year. This reflects higher costs in thefirst quarter. Our full year fuel guidance has been revised down by £40 millionreflecting the reduction in fuel prices. The fuel bill will now be accounted foron a continuing operations basis, and is expected to be some £1.95 billion." Group turnover for the third quarter at £2,068 million was up 0.5 per cent on aflying programme 1.8 per cent smaller measured in available tonne kilometres(ATKs). Passenger yields were up 1.9 per cent, measured in pence per revenuepassenger kilometres (RPKs). Seat factor was down 0.5 points at 74 per cent oncapacity 0.8 per cent higher measured in available seat kilometres (ASKs). For the nine month period, turnover improved by 6.5 per cent to £6,560 millionon a flying programme 1.5 per cent higher in ATKs. Passenger yields were up 3.7per cent with seat factor up 0.6 points at 77.6 per cent on capacity 3.3 percent higher in ASKs. For the quarter, unit costs were up 4.9 per cent on the same period as last yearreflecting total costs up 3 per cent and capacity 1.8 per cent lower in ATKs.Excluding fuel, unit costs were up 2.6 per cent. Total costs were up, driven mainly by higher fuel and employee costs. Fuel costsrose by 11.2 per cent due to the increase in fuel price net of hedging. Employeecosts were up by 2.0 per cent due mainly due to increased pension costs. Operating cashflow for the nine months was £608 million. Including currentinterest bearing deposits, the cash position at December 31, 2006 was £2,643million, up £203 million compared with March 31, 2006. Net debt was £866million, down by £775 million since the start of the year. ends February 2, 2007 010/KG/2007 Note to Editors • The current year and prior year results have been restated to reflect the agreement in principle to dispose of the regional business of BA Connect to Flybe. There is an accounting requirement under IFRS 5 to reclassify the financial results between continuing and discontinued operations. • Full year restated comparisons for the year ended March 2006 are as follows: Revenue £8,213 million against £8,515 million, fuel £1,581 million against £1,632 million and total costs £7,518 million against £7,810 million. • The British Airways Forum represents the airline's four unions: Amicus, BALPA, GMB and T&G whose national officers consult with the company on airline-wide policies. On 5th January after nine months consultation, the BA Forum issued a statement recommending acceptance of changes to future benefits in the New Airways Pension Scheme. A webcast of British Airways' conference call to city analysts can be accessedvia the internet www.bashares.com - on Friday, February 2 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 2006. The estimated impacts of the disruption in Quarter 3 and the averted strikes inQuarter 4 reflect the direct costs of the measures and the estimated revenueimpacts, both direct and indirect. The estimates of £40 million and £80 millionrespectively, are based on assumptions the company considers reasonable, but arejudgemental. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
International Airlines