British Airways Announces Wide-Ranging Rationalisation Programme

The airline will today unveil a major restructuring effort, aimed at cutting losses and improving profits by reducing passenger miles by 12% over the next three years. This involves replacing 20 Boeing 757 aircraft with smaller jets on short-haul European routes and cutting capacity on intercontinental services. The programme is expected to cost up to £2bn and follows a significant decline in pre-tax profits, which are forecast to be between £10m and £35m for the first quarter of 1999, compared to £145m in the same period of 1998.

Key Takeaways:

• British Airways will drop loss-making routes and cut excess capacity as part of a wide-ranging rationalisation programme aimed at bolstering profits.
• The airline seeks a 12% reduction in passenger miles over the next three years, with a focus on replacing larger jets with smaller aircraft on short-haul European routes.
• As part of the programme, British Airways will replace 20 Boeing 757 aircraft with smaller jets, cut capacity on intercontinental services, and potentially order up to 40 100-seater aircraft for short-haul routes.
• The programme is expected to cost up to £2bn and follows a significant decline in pre-tax profits, which are forecast to be between £10m and £35m for the first quarter of 1999.
• British Airways' chief executive, Bob Ayling, will unveil the carrier's first quarter profits today, with analysts expecting the airline to cut costs and blame lower yields for the decline in profits.
• The airline has already started to cut capacity on North American routes by replacing Boeing 747 jets with smaller Boeing 777 aircraft.

Statistics:

• 12% reduction in passenger miles over the next three years.
• 20 Boeing 757 aircraft to be replaced with smaller jets on short-haul European routes.
• Potential cost saving of up to £2bn.
• Forecasted pre-tax profits between £10m and £35m for the first quarter of 1999.
• £145m in pre-tax profits for the same period of 1998.
• Potential order of up to 40 100-seater aircraft for short-haul routes.

Sources:

• Lex, Page 16 Copyright Financial Times Limited 1999. All Rights Reserved.