British Airlines Fly Clear of Dark Clouds of Fuel and Fear
Posted on: Saturday, 6 August 2005, 09:00 CDT
BRITAIN'S airline industry surprised market expectations yesterday by shrugging off the effects of rising fuel costs and the terrorist threat.
British Airways, Europe's third largest airline, smashed industry predictions by doubling first-quarter profits on the back of premium passengers and higher fares.
BA's net income increased to GBP 90 million, or 7.9 pence a share, for the three months through June, from GBP 43m, or 3.7 pence, a year earlier, chief executive Rod Eddington said yesterday.
Industry surveys had set median profit expectations at around GBP 54m.
Meanwhile, the Luton-based low-cost carrier easyJet defied the rising fuel costs and a stronger US dollar to report strong quarterly results. Unit revenue rose by 1.5 per cent compared to the same period last year.
Said easyJet chief executive Ray Webster: "The Group's performance has been affected by external factors including rising fuel prices, and the strengthening US dollar. But these factors have been more than offset by our efforts to improve our revenue mix, by the growing diversity of our route network, and by the fact that we have chosen not to impose fuel surcharges on our passengers.
"The London terrorist bombings affected demand for inbound travel to London but, barring further incidents, are not expected to have a material impact on results for the year."
BA meanwhile increased average fares in the last quarter for the first time since 11 September, 2001, selling more first- and business-class seats and adding fuel surcharges to ticket prices to cover fuel rises of around 38 per cent.
BA shares rose by 8.5p, or 2.9 per cent, to 299p, their highest level since April. This brings this year's stock gains to 26 per cent.
British Airways' sales rose 8.3 per cent in the quarter to GBP 2.06 billion.
Passenger traffic increased 4.2 per cent last month as the airline flew more premium travelers and passenger capacity increased 2.4 per cent. The passenger load factor, or percentage of seats filled, increased 1.4 percentage points.
"The improvement in passenger revenue is driven by an improvement in the passenger mix and more customers flying in the premium cabins," said Eddington yesterday.
The airline raised surcharges on tickets in June by as much as 50 per cent to GBP 24, to recoup part of the cost of rising fuel prices.
BA said it expects fuel costs this year to be GBP 525million more than last year after hedging, a rise of GBP 75million from the company's June forecast.
BA has hedged 75 per cent of its fuel costs at an average of dollars 43 a barrel for the remainder of the financial year and is 30 per cent covered for 2006 at dollars 46.
The airline cut ticket-sales costs by half to about 7.5 per cent of revenue by reducing travel agents's commissions internet sales.
Strong BA passenger figures for July contradicted expectations of a "fear factor" after the London bomb attacks.
Source: Scotsman, The
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