British Airways has reported a pre-tax profit of £164 million for the three months to 31 December compared with a pre-tax profit of £151 million for the same period the previous year.
For the nine months, the pre-tax profit was £529 million (2004: £519 million), a company statement said.
Operating profit for the quarter was £175 million (2004: £136 million). For the nine months, operating profit was £612 million (2004: £510 million). The operating margin for the quarter was 8.2 per cent, 1.3 points higher than last year.
British Airways chief executive Willie Walsh said: “These are encouraging results, which reflect better revenue and the continued efforts of our people to strengthen the business.
“Revenue is up 8.8 per cent, driven by strong traffic volumes particularly in the premium cabin. Increased volumes have been achieved through significant promotional activity.
“Total costs are up by 7.3 per cent but we have initiatives underway to reverse the trend, such as management reductions, changes to working practices, reduced absenteeism and restructuring unprofitable parts of the business.
“Tackling our pension deficit is a major part of making our cost base more competitive. We have come to the end of a staff awareness programme on the implications of the significant deficit and we are reviewing the feedback before starting consultation with the trades unions and trustees by the end of March.
“We continue to develop and enhance our route network and products. Our new services to Bangalore and Shanghai are both ahead of target, regional services will be relaunched in March, six new European routes will soon start at London Gatwick and in the summer we will unveil our £100 million investment in Club World, our long-haul business class product.”
British Airways chairman Martin Broughton said: “Some yield improvement is still expected for this financial year. Consequently, revenue is now expected to grow by more than eight per cent. Despite the improved revenue outlook, market conditions remain broadly unchanged as significant promotional activity is required to maintain seat factors.
“Underlying costs, excluding fuel, are now expected to be some one per cent higher than the guidance we gave at the beginning of the year, which was flat. Fuel costs continue to be a challenge for the industry, but our guidance is unchanged, with total fuel costs expected to be up by £525 million this year.
“Our focus remains on preparing for the move to Terminal 5 in 2008, investing in products for our customers and continuing to drive simplification to deliver a competitive cost base.”
Group turnover for the third quarter, at £2,129 million, was up 8.8 per cent on a flying programme 3.7 per cent larger, measured in available tonne kilometres (ATKs). This reflected the impact of increased passenger and cargo revenue and fuel surcharges.
Passenger yields were down 1.5 per cent, measured in pence per revenue passenger kilometres (RPKs). Seat factor was up 1.3 points at 74.1 per cent on capacity 3.9 per cent higher measured in available seat kilometres (ASKs).
For the nine month period, turnover improved by 8.4 per cent to £6,393 million, on a flying programme 2.5 per cent higher in ATKs. Passenger yields were up 0.5 per cent, with seat factor up 1.1 points at 76.5 per cent on capacity 2.5 per cent higher in ASKs.
For the quarter, unit costs were down 1.8 per cent, compared with the same period last year, as a result of a net cost increase of 1.8 per cent on capacity 3.7 per cent higher in ATKs. The improvement in ATKS includes a two point increase due to temporary reductions in the flying programme in the third quarter of last year.
Total operating costs in the quarter increased by 7.3 per cent. Fuel costs rose by 28.2 per cent due to the increase in fuel price net of hedging, a stronger US dollar and a larger flying programme.
Employee costs were up by 8.3 per cent as wage awards and higher pension contributions were only partially offset by manpower reductions. This includes a £10 million restructuring provision to support the first phase of the management restructuring programme announced in November 2005.
Selling costs were up 7.8 per cent, largely due to additional promotional spend on new Indian services and the timing of new marketing campaigns.
Borrowings, net of cash, short term loans and deposits, were £2,178 million at December 31, down £744 million since the beginning of the year.
Cargo volumes for the quarter, measured in cargo tonne kilometres (CTKs), were up 0.3 per cent, compared with last year and yields, measured in cargo revenue per CTK, were up 0.5 per cent. For the nine month period, cargo volumes were 1.3 per cent lower, with yields up 2.4 per cent.