British Airways posts loss

February 4, 2002 Posted: 0843 GMT

LONDON (CNN) -- British Airways, Europe's biggest airline, posted a hefty third-quarter loss on Monday as an economic slowdown and September's terror attacks cut demand.

BA made a loss of £144 million ($204 million), or 13.4 pence a share, in the three months to December 31, compared with a £36 million profit, or 3.3p a share, a year ago. Sales slumped 20 percent to £1.8 billion.

Passenger numbers dropped by more than third after September 11 but the airline had already been under the cosh of an economic slowdown, which had crimped earnings in particular on its profitable North Atlantic route.

"These results reflect the massive impact on revenue of  September 11 and the ongoing economic slowdown," said chief executive Rod Eddington.

"We have made real progress in managing our costs but British Airways still faces a number of other considerable challenges some of which were apparent before the terrorist attacks on the U.S."

The London-based airline, which has slashed more than 7,200 posts since the attacks, is expected to announce more job cuts and plans to scale back loss making operations from Gatwick airport, south west of London, later this month.

BA's European dominance is under attack from low-cost airlines, like Ryanair and EasyJet, both of which forecast annual passenger growth of 25 percent. BA sold its low-cost airline Go last year.

"Go and Easyjet are entering Gatwick, BA has to decide whether to exit or leave those route," Chris Tarry, airline analyst at Commerzbank, told CNN. "There has been far too much capacity and BA has to recognise that."

BA hopes of forming a transatlantic joint venture with AMR Corp's American Airlines to trim costs were dashed after the U.S. Transportation Department imposed harsh measures on the deal.

On an operating level, BA made a loss of £187 million, while analyst's polled by Reuters expected losses of £337 million to £161 million. The airline said had managed to reduce cost by 8.5 percent and increase revenue per seat sold – or yield – by 0.3 percent.

BA, which has debts of more than £6.5 billion, also said it will not raise money through the sales of shares to refinance its balance sheet.

"Its cash utilisation is under a million a day," said Tarry, referring to amount of money BA spends on keeping the airline in the air. "I don't think this is the right time to be raising money from the market, they may leave it until later in the year."

BA's stock slipped 2.2 percent to 208 pence in early London trading.