LONDON (Reuters) - British Airways's (BAY.L) profit collapsed in the first quarter as high oil prices, an economic slowdown and weak consumer confidence combined in what the airline called the worst trading conditions it had ever experienced.
The British carrier reduced its annual revenue growth target to 3 percent from 4 percent previously and said it was focused on "achieving a small profit in the current financial year" and sustainable profitability in the medium and long-term.
BA now plans to raise ticket prices to recoup losses from a planned 3 percent reduction in winter capacity and spiraling oil prices.
Although BA said it had "mitigated the impact" of rising bills, its fuel costs rose 49 percent to 706 million pounds during the period as the price of a barrel of London Brent crude continues to hover around the $123 mark. BA said its annual fuel bill would likely top 3 billion pounds.
BA said it is now spending upwards of 8 million pounds a day to keep its planes in the air and will axe routes and raise fares to cope with the economic turmoil hitting the industry.
Profit before tax for the three months to end-June plunged by 88 percent to 37 million pounds from 298 million pounds in Q1 last year, missing an average forecast of 49 million pounds supplied by BA.
Analysts' forecasts for pretax profit ranged from 16 million pounds to 87 million.
The group's operating profit fell to 35 million pounds from 255 million pounds during the same period last year, missing the average analyst forecast of 51 million pounds.
Shares in BA, which have fallen almost 20 percent since the start of the year, were down 1.1 percent at 253 pence at 0805 GMT, valuing the company at around 2.87 billion pounds.
Blue Oar Securities analyst Douglas McNeill said BA had delivered "awful numbers" and a "grim" outlook, adding he would likely reduce his forecasts on the airline.
Walsh confirmed talks with Spanish carrier Iberia (IBLA.MC) about a potential all-share merger are underway but said it was "too early to say what impact it will have on the business in terms of jobs."
The results are the first full quarter to include operations at Heathrow's new BA-only Terminal Five.
BA said that more than six million passengers had traveled through the terminal since it opened for business in late March and that it was going "from strength to strength."
Having revised its capital expenditure plans, BA has ordered six new Boeing (BA.N) 777-300ER aircraft for delivery in early 2010.
"They are 23 percent more fuel efficient than the Boeing 747-400 and give us additional flexibility in the long-haul fleet, said Walsh."
Source:http://news.yahoo.com/s/nm/20080801/bs_nm/britishairways_dc;
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