BA remains bullish despite rising fuel costs

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British Airways World Cargo has posted a 22 per cent increase in commercial revenue to £178 million for the first quarter of its financial year; however its fuel bill for the same period was 51.2 per cent more than the previous year.

The company carried 1,237 million cargo tonnes kilometres during the period, an increase of 4.1 per cent compared to last year despite cargo capacity being down three per cent.

Sean Doyle, financial controller, BA World Cargo, said: “Generating a four per cent growth in volumes in spite of difficult market conditions is a pleasing achievement for the business. Volume growth aside, the increase in revenue also reflects significantly higher levels of fuel surcharge revenues which only partially offset the impact of unprecedented oil prices on BA’s operating profits.”

In the past two months BA World Cargo has increased its fuel surcharge three times with it currently standing at 87 pence.

Steve Gunning, managing director, BA World Cargo, added: “With both the price of fuel continuing to be high and consumer demand on the high street uncertain, there are difficult times ahead for carriers. Our focus over the coming months will be on delivering a robust cargo operation for our customers, which in turn will ultimately support the corporate financial goals of British Airways.”

However Gunning did say he thought today’s results were “encouraging”.

Overall, the British Airways business reported an 88 per cent drop in profit before tax for the period from 1st April – 30th June 2008 to £37 million, down from £298 million in 2007.

The company has put the poor results down to heightened fuel costs, which it said were up 49 per cent during the three months.

Willie Walsh, chief executive, said: “We are in the worst trading environment the industry has ever faced. The combination of unprecedented oil prices, economic slowdown and weaker consumer confidence has led to substantially lower first quarter profits.

“Fuel prices have doubled in the past year. A successful hedging programme mitigated the impact but nevertheless fuel costs at £706 million were up £233 million in the quarter. We expect our fuel bill to top £3 billion this year – the equivalent of more than £8 million every day.”

However he said the company is “well prepared” and has adapted its business plan to reflect the “fast moving and challenging conditions”.

British Airways and Spanish national airline Iberia are currently in talks over a merger deal as ever-increasing fuel prices and the current economic situation begin to affect business.

If successful the two companies would form the world’s third largest airline.

* After receiving a number of enquiries about its fuel surcharge policy, Adam Carson, senior manager revenue management at BA World Cargo, issued the following statement:
“We regularly review our fuel surcharge policy in response to the dynamic nature of fuel prices and exchange rates. However, our overriding approach to the surcharge has always been to keep it simple and consistent for our customers.  For this reason we have no plans to alter the structure of our current fuel surcharge mechanism.”

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