BA chief's vow as losses hit record £531m

BRITISH Airways yesterday posted record annual losses of £531m, as it counted the cost of the recession, a harsh winter and industrial action.

The slide into the red was slightly less than the 600m expected, although it brings BA's total losses for the past two years to 932m.

Chief executive Willie Walsh said the current financial year "could hardly have had a worse start" due to the disruption caused by Iceland's volcanic eruption, which closed most of European airspace for almost a week in April.

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Mr Walsh added: "We think we can break even on the pre-tax profit level in the next full year. Long-haul premium traffic has recovered and reductions in short-haul traffic have eased.

"Market conditions are showing improvement from the depressed levels in 2009/10."

Shares in BA, which have dropped 17 per cent in the last month, rose yesterday, valuing the business at about 2.2bn.

The results were affected by cabin crew strikes in March, which cost the carrier 43m and are due to continue next week.

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They do not include the 100m "hit" it took from the ongoing disruption caused by the eruption of an Icelandic volcano last month.

Howard Wheeldon, a senior strategist at BGC Partners, said: "I admire BA's optimism but even if you ignore strikes, volcanic dust and the state of the economy I'm not at all confident that the slight improvement we have seen will result in break even or that the market is on the up. I think we're in for a very long flat period at best."

Mr Walsh said returning the business to profitability required "permanent change across the company".

Unite said BA staff would start three five-day strikes next week unless a dispute over pay and terms is settled.

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BA said its merger with Spain's Iberia, which is expected to generate 400 million euros (348m) a year in cost savings, would be complete by the end of 2010.

It also said it hoped plans to form a commercial alliance with American Airlines would be approved by the US Department of Transportation and the EU by this summer.

BA, Europe's third-largest carrier, said it had managed to cut costs by around 1bn in its last fiscal year, thanks, in part, to a fuel bill 600m lower.

However, the airline said it was unable to recommend a dividend this year because of its financial situation.

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Passenger traffic fell 3 per cent during the year, with first and business-class travel – the most profitable part of its passenger business – falling in nine of the 12 months.

On Thursday, Air France-KLM predicted a return to break even this year after it posted a record full-year operating loss of 1.29bn euros.

Earlier this week, industry body IATA said demand for business and first-class seats rose in the first-quarter of 2010.

However, the IATA also reported that premium travel was still 15 per cent below pre-recession levels.

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BA chairman Martin Broughton has also urged the new Government to think again on its plans to shift aviation tax to a "per-plane" basis.

He said the sector should not be used as "a convenient source of public sector funding".

He added: "The industry is vital to the UK economy and the travelling public as the airspace closure indicated, yet we have a larger, and increasing, tax burden than other transport sectors."

A history up in the air

British Airways can trace its origins back to the birth of civil aviation.

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On August 25 1919, British Airways' forerunner company, Aircraft Transport and Travel (AT&T), launched the world's first daily international scheduled air service between London and Paris. The first flight, operated by a single-engined de Havilland DH4A biplane took off from Hounslow Heath, and carried a single passenger and a cargo of newspapers, Devonshire cream and grouse.

In the mid 1930s, a number of smaller UK air transport companies merged to form the original privately-owned British Airways.

The British Airways Heritage collection was established to preserve the records and artefacts of British Airways' predecessor companies – BOAC, BEA, BSAA and the pre-war Imperial Airways and British Airways.

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