3rd Nov 2006 07:01
British Airways PLC03 November 2006 GOOD RESULTS IMPACTED BY DISRUPTION • Disruption costs £100 million • Operating profit of £240 million before BA Connect write-down of £106 million • Operating profit of £134 million • Pre-tax profit of £176 million • Revenue up 4.9 per cent • Agreement in principle to sell BA Connect British Airways today announced its second quarter results ended September 30,2006 including a one-off write down of the group's investment in its regionalsubsidiary BA Connect of £106 million. This resulted in an operating profit of £134 million for the quarter (2005: £261million) and £345 million (2005: £437 million) for the half year giving anoperating margin of 5.8 per cent and 7.5 per cent respectively. The pre-taxprofit was £176 million for the three months (2005: £241 million) and £371million for the half year (2005: £365 million). Excluding the BA Connect write-down, the operating profit for the quarter was£240 million and £451 million for the half year giving an operating margin of10.4 per cent and 9.7 per cent respectively. The pre-tax profit was £282million for the quarter and £477 million for the half year. Willie Walsh, British Airways' chief executive, said: "Given the significantimpact of the security disruptions, estimated at a cost of some £100 million,these are good results. Despite the extremely difficult operational environment,we have delivered improved revenue. "As part of our continued efforts to improve the profitability of shorthaul wehave today announced that we have reached agreement in principle to sell theregional business of BA Connect to Flybe. Point to point regional operations arenot a strategic part of our business and we believe that such activities arebetter undertaken by a regional low cost airline.* "Our focus on costs is working and has helped offset the revenue impact ofrecent weeks. Fuel costs in the quarter increased by nearly a third. Underlyingunit costs, excluding the BA Connect write-down and fuel, were down 1.1 percent. Costs will continue to be our focus as we work towards achieving a 10 percent operating margin. "This is an exciting time for our customers with the rollout of our nextgeneration Club World flat bed later this month. We are also enhancing ba.comto make it easier for our customers to book and get information about theirtravel plans. It was an invaluable tool during the disruption in August becauseit gave hundreds of thousands of our customers quick and easy access to the verylatest news. "As we have previously announced we have taken the first steps in the processtowards expanding and renewing our fleet with the launch of a competitionbetween aircraft and engine manufacturers. However, we must first tackle the£2.1 billion deficit in the New Airways Pension Scheme (NAPS). Negotiations areprogressing with the trustees and we continue to consult with our trade unions.I remain confident that we will resolve this issue." Martin Broughton, British Airways' chairman, said: "Overall market conditionsare broadly unchanged. Longhaul premium transfer and shorthaul premium traffic,although recovering, continue to be affected by the tighter securityarrangements currently in place. As a result, total revenue is now expected tobe 4.5 per cent to 5 per cent higher than last year, down half a per cent fromour previous guidance. "We expect that total costs, excluding fuel, will be flat compared to last year.Total fuel costs net of hedging for the year are expected to be some £400million higher than last year, based on current prices and sterling dollarexchange rates." "We welcome the governments announcement yesterday on the re-introduction ofliquids in cabin baggage which brings the UK into line with the rest of the EU.We will continue to support the BAA as they work to improve the customerexperience across London's airports." Group turnover for the second quarter was £2,313 million (2005: £2,205 million),4.9 per cent up on a flying programme 1.5 per cent up, measured in availabletonne kilometres (ATKs). Traffic volumes, measured in revenue passengerkilometres (RPKs), were up 3.6 per cent. Seat factor was up 0.1 points at 79.7per cent on capacity 3.4 per cent higher in available seat kilometres (ASKs).Yield measured in pence per RPK was up 2.2 per cent. Reported unit costs increased by 10.5 per cent on the same period last year.Unit costs excluding the BA Connect write down and fuel, were down 1.1 per centon capacity 1.5 per cent higher in ATKs. Fuel costs increased by 30.2 per cent to £534 million due to the increase infuel prices. Employee costs were up 1.4 per cent due to increased pension costspartially offset by management headcount reductions. Operating cashflow for the six months was £439 million (2005: £530 million).Including current interest bearing deposits, the cash position at September 30,2006 was £2,633 million, up £193 million compared with March 31, 2006. Net debtwas £1,125 million, down by £516 million since the start of the year. The board has decided that no interim dividend will be paid. ends November 3, 2006 111/KG/06 Note to Editors: * See separate release on BA Connect. British Airways' presentation to city analysts can be accessed via the internetwww.bashares.com at 9am. A webcast of British Airways' conference call to cityanalysts can also be accessed via the internet www.bashares.com 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 programs, expected future revenues, financing plansand expected expenditures and divestments. All forward-looking statements inthis report are based upon information known to the Company on the date of thisreport. The Company undertakes no obligation to publicly update or revise anyforward-looking statement, whether as a result of new information, future eventsor otherwise. It is not reasonably possible to itemize 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 cost of the new security measures introduced in August reflectsthe direct cost of the measures and the estimated revenue impacts, both directand indirect. The estimate of £100 million is based on assumptions the companyconsiders reasonable, but are judgemental. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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