British Airways makes £292 million loss in half year

Revenue at the company dropped 13.7 per cent from the same period last year and total operating costs fell 8.7 per cent.

British Airways said that it would not be paying a dividend.

Willie Walsh, chief executive of British Airways, said, "Aviation remains in recession with IATA predicting that the industry will lose $11 billion this year. We were quick to respond to the crisis by taking out excess capacity and, at the same time, driving down unit costs by 5.2 per cent. This demonstrates how well our costs have been managed in the first half and it's imperative we continue to deliver on our plans to reduce costs further in the second half. With revenue likely to be £1 billion lower this year, we can't stand still and further cost reduction is essential.

"We reduced summer schedule capacity by 3.5 per cent, our costs are some £400 million lower and manpower has been cut by 1900 through reduced overtime, increased part time working and targeted voluntary redundancy. Total liquidity of some £4 billion puts us in a strong position.

"The global airline industry is facing continued pressure on yields highlighting a significant shift within the industry. We will introduce further structural change in the second half to secure the long term future for our business. We are cutting winter capacity by 6 per cent and making further manpower reductions of 3000 by March 2010 and permanent changes to the way we run our business.

"Premium leisure demand has been strong during the last six months and we're investing in new leisure destinations with six new routes starting this winter.

Richard Hunter, Head of UK Equities at Hargreaves Lansdown Stockbrokers, said, “BA continues to be buffeted by economic headwinds. Whilst there are some signs of investor impatience, the company’s focus on cost control is a positive for the share price in early trade.

“The problems are well known but nonetheless ever-present – a tough economic environment compounded by volatile fuel prices, an aggressively positioned set of competitors, a loss of premium cabin business, an onerous pension deficit and some staff unrest. Against this list of challenges, the company is looking to bear down strongly on costs to reflect the lighter demand, should show some benefit next year from a more recent stabilisation in the oil price, and the longer term story for generally increased air travel remains intact. Meanwhile, the ongoing talks to bolster business with the likes of Iberia and American Airlines have yet to pass the relevant regulatory approval.

“On balance, BA’s determination to cut its cloth has been well received by the market, with the shares having posted a 26% gain over the last year, during which period the wider FTSE100 has risen 20%, even though it remains significantly off its previous highs. Nonetheless, BA bulls remain steadfast and in sufficient numbers to counteract the bears, such that the overall consensus is that the stock remains a strong hold.”

By 9:54 am shares in British Airways were up 6.6 per cent to 198.60 pence per share.