Air Transport

British Airways (BA) has raised its revenue forecasts for the year ahead after an eye-catching profits performance in the June quarter. But the carrier also warned that the uncertain economic outlook and fuel price volatility make forecasting a “challenge".

A better mix of premium traffic lay behind the results, helping to push up revenues by a healthy 8.3% in the quarter, which is the first of the carrier’s 2005/6 financial year. Passenger yields across the network rose by 1.5% and load factors hit a record high of 75.6%. That more than offset the impact of rising fuel and wage costs to deliver net profits of £90 million ($157 million), more than double those of a year ago.

In the light of a strengthening US dollar and increased fuel surcharges BA chairman Martin Broughton says that the group is now projecting a 5.5-6.5% rise in revenues for the full year, up from initial forecasts of 4-5% growth.

Fuel costs soared by nearly 38% over the quarter, however, and with the dollar now stronger BA expects its full year fuel expenses to be around £525 million higher than last year after hedging, up by a further £75 million on previous forecasts. That would put fuel a third higher for the year.

BA says that it has around 75% of its fuel hedged at $43 per barrel of the rest of the financial year and 40% covered for the following year at $50.

Wages were also up by 5% in the quarter on the back of pay increases, but selling costs offset this falling by £30 million, or 22%, thanks to lower travel agency fees and online selling.

The impact of the 7 and 21 July terrorist bombings in London appear not to have had a “material” impact on traffic, says chairman Martin Broughton, quoting record load factors for the month, although he warns that it is still too early to say whether there will be some longer term fall-out. Ryanair had earlier reported a 10% fall in traffic in the immediate aftermath of the 7 July bombings on the London transport system.

For related blogs click here here