British Airways PLC said Friday that its cost-cutting drive has put the airline on the right course but won't save it from posting record losses in the current year.
In an update on the nine months ending Dec. 31, the carrier reported an operating of loss of 86 million pounds ($135 million), compared to a profit of 89 million pounds a year earlier, and a pretax loss of 342 million pounds compared to a loss of 70 million pounds.
Operating costs were down 10.5 percent, but that didn't keep pace with a 12.9 percent fall in revenue. The company did not disclose net profit figures for the period.
"While we are on the right track, we still expect to make record losses this year," said Chief Executive Willie Walsh. "Permanent structural change is being introduced in all areas and will return us to sustained profitability."
Premium traffic volume declined by 9.7 percent during the nine months, which BA said was better than the industry as a whole. It said the volume was stable and yields were improving.
In January, premium traffic was down 2.1 percent while other passenger traffic fell 7.9 percent.
Dire as the numbers were, Hargreaves Lansdown analyst Richard Hunter said BA's update "comes as something of a pleasant surprise."
But Hunter also noted that the airline also has to contend with a potential strike by cabin crew, a pension deficit, fierce competition and volatile fuel costs.
British Airways is locked in a dispute with cabin crew over issues including wages, job security and working conditions. The Unite union has called for a strike vote by members.
"Today's losses were better than forecasts and we expect our full year forecasts to be adjusted accordingly," said James Cooke, analyst at Panmure Gordon.
"Year on year comparisons should improve and even though premium revenues are starting to improve, the uncertain economic outlook may slow down the speed of the revenue recovery."
BA said it was confident of winning regulatory approval for a merger with Spain's Iberia, which was announced in November. BA also said it was confident of approval for its proposed North Atlantic joint venture with American Airlines and Iberia.
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