A SET OF RECORD figures for 1995/6 has ensured that British Airways reclaimed its title as the world's most profitable airline. The group shows no intention of letting its lead slip, making an immediate announcement of another massive drive to improve costs, further product upgrades and an expansion of its successful venture into franchising.
Heading off rumblings from the financial community that the group may have peaked with its latest record performance, the airline's chief executive, Bob Ayling, has wasted little time in setting out goals for a new efficiency drive designed to make gains of £1 billion over the next three years.
There are few specific details available so far of the planned improvement, but Ayling indicates that it will come by way of continued pressure throughout the group by a mix of cost savings, revenue enhancement and increased utilisation. The group reckons that it has already chalked up around $1 billion through a similar drive over the past five years.
The results of the cost savings so far show through clearly in BA's results to the end of March. Pre-tax profits climbed by almost 30% to an historic high of £585 million.
Behind the performance was a strong, 9.8%, rise in traffic, pushing up load factors to a new annual high of 73.6%. Load factors have grown progressively over six quarters, peaking over the height of the northern-summer season at around 80% from London Heathrow, and BA appears keen to sustain the improvement.
Double-digit growth in business-class traffic also helped yields to edge up by 0.8%. Ayling points to the £500 million investment in brands, which was launched a year ago with the first-class sleeper seat and improved pitch for international business class. He says that BA will turn its attention to the economy cabin in the next phase of the programme to be launched around September.
The airline's global network of alliances has also been paying dividends, although the BA board remains coy about talks taking place with American Airlines.
Overall, BA says that its alliance partners contributed £150 million to the group result. That included around £80 million from the USAir link, £46 million from BA's stake in Qantas and another £50 million in revenue from its franchising partners. That was offset by a loss of £68 million from the Deutsche BA and TAT operations, although BA points out that this is down from a £90 million the year before and excludes the benefits brought to the group's profitable routes.
Ayling says that plans are already in place to sign up fresh franchise partners, possibly from outside Europe. He does not rule out the possibility of extending the experiment to areas such as Asia.
The results were slightly marred by news of a strike ballot by BA pilots, but that appears to have subsided. Overall, staff have been offered a pay rise of 0.5% above inflation over this year and next. They also took home a bonus of just under a month's pay under the profit-sharing scheme, with an extra 20% if they elected to take shares in BA. Shareholding by employees is now up to 4% of the group, according to Ayling.
Source: Flight International