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News > International
British Air 2Q profit flies
November 6, 2000: 10:00 a.m. ET

Airline soars on more business traffic and cost cuts; to sell cut-price airline Go
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LONDON (CNNfn) - British Airways PLC said Monday that success in luring more business-class passengers and deep cuts in staff costs fueled a sixfold leap in second-quarter profit. The firm signaled a further retreat from the low-priced end of the market by vowing to sell Go, its no-frills airline.

Europe's largest airline in terms of passengers carried said net income in the three months to Sep. 30 rose to £192 million ($278 million), or 17.3 pence a share, from £30 million, or 2.8 pence a share, a year earlier. Revenue rose 5.8 percent to £2.55 billion.

graphicThe company last year posted its first annual loss as a publicly listed business, as extra flights on North Atlantic routes added to the number of seats available, boosting competition and driving down prices.

Since then, chief executive Bob Ayling has been ousted. New man Rod Eddington has tackled the problem of low profitability by focusing more on selling premium-priced seats, for example by introducing beds on London to New York flights and replacing some jumbo jets with smaller Boeing 777s on long-haul routes.

"We are taking a ruthless approach towards poorly performing routes and assets," said Eddington. "Those not adding value to improve performance are being removed."

British Airways shares rose almost 8 percent to 355 pence in afternoon trade in London.

The company said its premium traffic rose 7.7 percent, with enhancements like flat beds in Club World "winning significant market share".

graphicSales increased even as British Airways slashed staff costs by 13 percent, or £88 million, from a year earlier, by cutting out operations it identified as underperforming. That outweighed a rise of 32 percent, or £61 million, in spending on fuel as the price of oil soared to 10-year highs.  

The airline, which ended merger talks with rival KLM Royal Dutch Airlines NV in September, has declined to comment on media reports that it is in talks with Société Air France and Delta Air Lines Inc. (DAL: Research, Estimates) to join their global alliance.

BA is "firmly in the oneworld alliance" with partner AMR Corp.'s  (AMR: Research, Estimates) American Airlines, Eddington told CNNfn. "We certainly plan to grow that business."

Many of BA's problems lie in its European operations. These lost £310 million last year partly because of cut-throat competition from a host of increasingly popular cut-price airlines that are blanketing the region with low fares for both leisure and business travelers.

Low-cost unit has to Go


Even Go, which BA set up in 1998 with an initial £25 million investment, has been gnawing at its parent's short-haul revenues. The budget carrier, led by Chief Executive Barbara Cassani, now flies to 20 destinations from its hub at London's Stansted airport.

"Go...has made a profit every month this year. However, given the strategic goals we have set for the group as a whole, now is the time for British Airways to gain the benefits of its investment and realize the considerable value it has created for Go," BA said in a statement. Goldman Sachs has been named the adviser for the sale.

The carrier, which estimates earlier this year valued at about £300 million, plans to break even in 2001. However, some analysts doubt that will be possible as it faces tough competition from more established no-frills operators such as Ryanair PLC  (RYAAY: Research, Estimates) and easyJet PLC.

British Airways also said that it would in the next few weeks announce changes for its operations from the winter 2001 season onwards at London's Gatwick airport. The airline has already announced it would scrap a handful of routes from Gatwick that it already serves from the larger and more attractive Heathrow airport, its main hub.

The will be "some job losses," Eddington told CNNfn. "The losses will be carried out over two-to-three periods." More than 3,000 jobs have gone from all operations since last year and Gatwick now employees about 6,000 staff. 

The company said operating profit in the quarter doubled to £264 million, while profit before tax surged 400 percent to £200 million. Back to top

--from staff and wire reports

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.