LONDON, July 30, (Agencies): British Airways PLC on Friday said its losses widened 15 percent to £122 million ($190 million) in the three months ending June 30 as operations were disrupted by cabin crew strikes and a cloud of volcanic ash from Iceland.
However, the airline said that underlying revenue increased and it achieved further cost reductions. Chief Executive Willie Walsh said he still expected the carrier to break even for the full year.
For the three months, BA said revenue of £1.94 billion was 2.3 percent less than in the same period a year ago. Without the disruptions, BA said passenger revenue would have been up by 11 percent compared to a year earlier.
The net loss compared to a loss of £106 million a year ago.
British Airways shares were up 1.2 percent at 218.5 pence as trading opened on the London Stock Exchange.
“The trends in our passenger and cargo traffic continue to be positive with yields up and costs down,” said Walsh.
“Together this led to a reduced operating loss for the period though pretax losses increased as a result of additional finance costs and the impact of non-cash foreign exchange movements.”
BA was hit by 23 days of strikes by cabin crew in May and June and suffered a major interruption of operations in April due to the volcanic ash cloud from Iceland. Cabin crew have voted down BA’s latest contract offer, and may call further strikes.
The airline had previously reported that first-quarter traffic was down 14.9 percent compared to a year earlier and capacity was down 11.3 percent.
The first quarter loss follows a record annual loss of £425 million ($665 million) for 2009-10.
Walsh said the airline was braced for further strikes.
“I want to reach a resolution but we are preparing for further industrial action. I am confident we will operate 100 percent of our long-haul services and we are looking at the short-haul program,” he said. The CEO said the offer recently rejected by the union was BA’s “best and final offer.”
“It addresses all the genuine concerns and I still believe it forms the basis of a resolution to the dispute,” he said.
Derek Simpson, joint leader of Unite union, said his members wanted to see the airline thrive.
“This is a dispute over £10 million. Contrast that with the £164 million in (pretax) losses this quarter alone and questions must be asked about the direction of BA’s management and the sense of them maintaining this dispute with cabin crew,” Simpson said.
BA’s privately held British rival, Virgin Atlantic, said Friday that it had an operating loss of £132 million in the three months to June 30, although revenue was up 10 percent to £513 million.
British Airways recently gained regulatory clearance for its merger with Spain’s Iberia Airlines, and for a joint trans-Atlantic business with Iberia and American Airlines.
BA, which is looking to merge with Spain’s Iberia, said losses after tax rose 15 percent to the equivalent of 146 million euros or $191 million in the three months to June compared with a year earlier.
“Despite both revenues and cost being hit by the closure of UK airspace following the Icelandic volcanic eruption and the impact of industrial action, our financial performance improved during the quarter from underlying revenue increases and further cost reductions,” BA chief executive Willie Walsh said.
BA added in a statement: “While some economic experts are flagging the risk of a ‘double dip’ recession, the steady recovery continues and, on that basis, we continue to target to break even at a profit before tax level for the full year (to March 2011).”
The positive outlook helped to send BA’s share price rising 2.55 percent to 221.50 pence in midday London trade, dealers said.
BA, which suffered record annual losses in 2009/10 on slumping sales amid the severe economic downturn, was hit at the start of its trading year by the ash cloud chaos and a bitter row with cabin crew over pay and perks.
Staff have rejected the airline’s latest offer to end their long-running dispute, raising the prospect of fresh strikes.
Derek Simpson, the co-leader of Britain’s largest union Unite, said on Friday that while he was sorry to see BA lose money, the carrier was wrong to impose changes to cabin crew working conditions without agreement.
“You have to question the direction and sense of the management, particularly its chief executive who wants to impose change in a bid to put up profits without the support of staff,” Simpson told BBC radio.
In a bid to turn around its fortunes, BA is seeking to merge with Iberia and forge a transatlantic alliance with American Airlines.
BA took a step nearer completing its tie-up with Iberia in June after agreeing a recovery plan to address its employees’ pension deficit.