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British Airways loss grows
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May 23, 2000: 6:55 a.m. ET
Deficit rises in 4Q as Europe's largest airline posts first annual loss since IPO
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LONDON (CNNfn) - British Airways reported a sharply higher fourth-quarter loss on Tuesday, and though its full-year result was at the top end of expectations the airline slumped to its first loss since privatization in 1987.
Europe's largest airline by revenue closed a turbulent year with an upbeat assessment by its new chief executive, amid signs that its strategy of selling more high-priced tickets to business passengers is starting to bear fruit.
CEO Rod Eddington also warned that high fuel prices would continue to cloud the outlook for earnings, however. BA (BAY) shares slid 5 percent by midday after a brief rally.
Intense competition, particularly on routes across the Atlantic, and a jump in fuel prices have hammered earnings at what was the world's most profitable airline during the mid-1990s.
BA reported a fourth-quarter pretax loss of £175 million ($261 million) for the three months ended Mar. 31, compared with an £85 million loss a year earlier. The operating loss in the quarter jumped to £125 million from £85 million a year ago, although revenue rose 3.2 percent to £2.11 billion.
"I believe that the basic planks of our strategy ... are a good foundation for a return to profitability," said Eddington, who took over as CEO in May following the sacking of Bob Ayling.
BA mum on KLM tie
The company said its average yield, a measure of the fares paid by passengers, rose 3.3 percent in the fourth quarter, the second straight quarterly gain after more than two years of steady declines. Lower yields have been a feature of the entire airline industry in recent years.
 For the year to the end of March, BA posted a pretax loss before gains from asset sales of £244 million, falling from a £225 million profit the previous year. Analysts polled by Reuters predicted a loss of £276 million for the latest full year.
Including a one-time gain of £249 million from asset sales, BA reported an annual pretax profit of £5 million. Operating profit fell 81 percent to £84 million and revenue climbed just 0.5 percent to £8.94 billion.
The airline said it would pay an unchanged dividend of 17.9 pence a share.
BA made no reference Tuesday to recent media reports that it is seeking merger talks with KLM Royal Dutch Airlines, which recently broke its alliance tie with Italy's Alitalia.
The broad alliance between BA and AMR Corp's (AMR: Research, Estimates) American Airlines, negotiated by Ayling some three years ago, has been dogged by regulatory concerns, leaving BA isolated in the rapidly consolidating global airline industry. American is pursuing closer ties with Swissair, though it still retains a loose marketing alliance with BA.
Recent days' reports said BA and KLM, which held merger talks in 1992, are discussing a combination that would give the U.K. airline's shareholders an 85 percent stake in a merged company. KLM has an alliance with Northwest Airlines (NWAC: Research, Estimates). 
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