British Airways issues profits warning

Tuesday, January 27, 2009

The United Kingdom's flag carrier airline, British Airways (BA) has warned the markets that it will post a full year loss of up to £150 million.

The former state airline, privatised in 1987, saw its shares fall 8.5% on the back of an announcement that "further economic weakness in January and the outlook for February and March combined with the fall in sterling are impacting our outlook for the year", according to The Daily Telegraph. Quarterly revenues are still anticipated to grow by 4%, but a full-year loss is now expected. Costs have risen in recent months, whilst the historic lows of sterling have hit the bottom line. First and Business Class traffic has fallen as the global credit crisis has hit premium and business travel. Fuel costs have fallen, but previous hedging has negated this benefit.

The airline has been considering a merger with Spanish flag carrier Iberia, but The Guardian, relaying Reuters, reports that Iberia now has a larger market capitalisation than BA, changing the field of play.

The airline sector in general is facing trouble, with American and United posting fourth quarter losses and the Franco-Dutch Air France-KLM issuing a profits warning.

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Sources

"British Airways warns of £150m loss" — The Daily Telegraph, January 26, 2009
Steve Rothwell. "British Airways to Report Loss on Traffic, Currencies" — Bloomberg L.P, January 26, 2009
John Bowker (Reuters). "British Airways warns of full-year operating loss" — guardian.co.uk, January 26, 2009
"Weak pound hurts British Airways" — BBC News Online, January 26, 2009

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