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British Air 3Q tops forecast
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February 7, 2000: 6:20 a.m. ET
Carrier posts smaller-than-expected loss, sees gains from premium flyers
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LONDON (CNNfn) - British Airways beat expectations Monday with a smaller-than-expected fiscal third-quarter loss, amid signs that its strategy of focusing on premium passengers may help cut its full-year deficit.
Britain's largest airline is heading for its first full-year loss since privatization in 1987, stung by a surge in fuel prices and intense competition from European and U.S. rivals which have also seen their profits plummet.
BA reported an operating loss of 2 million pounds ($3.24 million) for the quarter ended Dec. 31, compared with a 92 million pound profit a year earlier. The consensus among analysts polled by Reuters was for a 24 million pound deficit.
The airline has embarked on another round of cost-cutting and unveiled an ambitious plan to focus on high-value premium passengers, cutting aircraft capacity by 12 percent over the next three years and investing heavily in new services for business-class passengers.
Analysts said the first fruits of the strategy were appearing as BA reported its first improvement in passenger operating margins for seven quarters, with a rise of 3.2 percent. While the number of coach passengers declined 2.8 percent, premium traffic rose 6.8 percent in the quarter.
"BA has taken a very sensible [strategic] approach," said analyst Ian Wilde at SG Securities in London. He upgraded the stock from "hold" to "buy".
Revenue in the quarter rose 3 percent to 2.2 billion pounds ($3.5 billion), but the operating result was hit by a 28 percent surge in fuel charges.
Gains from the sale of assets added 60 million pounds in the quarter, reducing the net loss to 60 million pounds, against a 75 million pound loss a year earlier. The loss per share was flat at 6.6 pence.
"We are reading the market correctly and the trends are going in the right direction," said chief executive Robert Ayling in a statement.
For the first nine months of the year, revenue was flat at 6.63 billion pounds, while operating profits dropped 60 percent to 209 million pounds and net income slid a similar amount to 90 million pounds. Earnings per share were 13.6 pence against 25.6 pence in the same period a year earlier.
Analysts remain concerned about the impact of rising oil prices, but the rise in third-quarter yields is expected to see full-year loss forecasts cut from 200 to 250 million pounds to around 150 million pounds.
British Airways (BAY) shares were more than 2 percent lower at 302.25 pence in Monday late morning trading, erasing earlier gains that put the stock as high as 325 pence. 
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British Airways
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