Friday, May 22, 2009

British Airways slumps to record annual loss

LONDON, May 22 — British Airways slumped to a record loss, nearly doubled its debt pile and cancelled its dividend, adding the tough conditions made it impossible to give any guidance for the current period.

Europe's third-biggest airline by revenue posted operating losses of £220 million (RM1.2 billion) today, compared to a profit of £875 million in 2007/08.

It had earlier in the year forecast a loss of £150 million, not including restructuring costs of around £80 million.

"The revenue outlook continues to be weak during the current financial year... In light of this, the board is unable to recommend a dividend this year," chairman Martin Broughton said in a statement.

BA said it would continue cost-cutting, while flying capacity for next winter will be cut by 4 per cent.

The British carrier's debt rose to £2.4 billion, from £1.3 billion the previous year, while its cash position slid £483 million to just under £1.4 billion.

Analysts and shareholders have been concerned about the group's pension deficit, which was valued at £1.5 billion at March last year but is likely to have grown substantially since then.

"If the financial markets deteriorate further, our pension deficit may increase, impacting balance sheet liabilities, which may in turn affect our ability to raise additional funds," the company said in the statement.

A full actuarial review of the retirement scheme is currently under way, with the results expected to be published in late summer.

The pension deficit has been an issue during merger talks with Spanish partner Iberia, but the Madrid-based airline said last week it was more focused on its own performance than the tie-up discussions.

British Airways shares, up 14 per cent this month, closed down 3.5 per cent at 162.8 pence yesterday, valuing the business at £1.9 billion.

Air France-KLM showed a glimmer of hope for the battered industry earlier this week when it posted a narrower than expected operating loss, also by squeezing costs. — Reuters

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