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Friday, February 05, 2010

BA's Battle For Survival

British Airways (BA), the self styled "world's favourite airline", has announced pre-tax losses of £50M in the three months to December 2009 (an improvement on the £122M loss in the same period in 2008).

BA's pre-tax loss in the nine months to December now stands at £342M (compared with £70M in the same period in 2008).

The results are nonetheless better than analysts expectations.

Does this mean that BA has a rosy future?

No, not if you believe what CEO Willie Walsh has told the BBC (he expects record losses):

"Operating costs are down by 10.5% and show that we've adapted quickly to the new businesses realities created by the global recession.

We still expect to make record losses this year.

Permanent structural change is being introduced in all areas and will return us to sustained profitability

BA also faces a £3.7BN pension funds' deficit.

Walsh's negative outlook in part can be explained by the fact that he is fighting Unite (the cabin crew's union), and that he needs to highlight that the company is facing a struggle for its survival.

However, the BA could still very easily go under:

1 Industrial action will further damage its already poor customer relations.

2 The pension deficit, as mentioned, needs to be addressed.

3 Stabilisation of passenger numbers is not enough, it needs to attract more customers. The only way it can do that is to cut prices, but improve customer care. A very tall order indeed!

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