In the red BA axes dividend

BRITISH Airways today reported the worst losses since privatisation and passed on its dividend, but beat City forecasts with a deficit of £200 million.

Chief executive Rod Eddington stressed that the final three months of the year to 31 March showed a marked improvement due to cost reductions but gave no assurances of a pick-up in underlying trading.

'The market remains soft. It is still too patchy to forecast,' Eddington said. 'We are not assuming there is going to be a substantial improvement on the revenue.'

While staying in the black to the tune of £144m, profits from North Atlantic travel fell £320m over the year. Earnings in the Far East and Australasia were down £ 90m and Europe was £70m worse.

Eddington's cost-reduction programme will see 13,000 job cuts in the next two years. About 7,000 staff have been axed already with a further 3,000 this year alone. That came at a cost booked in today's figures of £80m.

However, the bottom line figure was also flattered by the £110m BA made from last year's sale of no-frills airline Go to venture capitalists. Go was sold to easyJet for £374m last week, but Eddington was not red-faced today. 'We sold Go at the right time for BA and got a 400% return on our investment,' he said.

Eddington said the final three months of the year to 31 March had seen total costs fall by 12.1% although losses widened in the fourth quarter to £85m from £65m in the same period a year earlier. However, on an operating level, the final quarter saw BA make a profit of £35m - £96m better than last year.

He pledged tight controls on costs in the coming year, but City investors remain concerned over how BA can fight the continuing lack of appetite for transatlantic travel among its core business customers.

In the year to 31 March, turnover at the group fell 10%, from £9.28bn to £8.34bn, turning pre-tax profits of £150m the previous year to losses of £200m. This was better than envisaged by many analysts, as the City had been expecting pre-tax losses of between £218m and £400m. The shares gained 2p to 237 1/2p as a host of brokers upgraded forecasts.

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