Shares in British Airways fell on the FTSE 100 in morning trading today after the airline, which has hit by strikes, competition from budget airlines and most recently a volcano, reported a record loss of £531 million.
The airline reported an operating loss of £231 million for the full year ended 31 Mach, below the £250 million predicted by analysts and down from a loss of £220 million in the previous year.
In the final quarter of the year British Airways made a loss of £145 million, down from a loss of £309 million in the same period the previous year.
However pre-tax losses for the full year were £531 million, worse than the record loss of £401 million the airline reported for 2009.
British Airways is currently in the midst of a fierce industrial dispute with its cabin crew, who are expected to strike on Monday after a High Court injunction preventing industrial action was overturned by an appeal from trade union Unite.
Willie Walsh, Chief Executive of British Airways, said, "Despite a £1 billion drop in revenue during the year, our determined efforts on cost control mean that costs have reduced at a comparable level and our operating loss is virtually the same as in the previous year. To be in the midst of the biggest economic downturn in 60 years and produce the same operating figure as last year shows the hard work that has been put into steering our business through the recession. Total costs are down by almost £1 billion, comprising a £597 million reduction in fuel costs and a £390 million reduction in non-fuel costs. The cut in non-fuel costs has been achieved by the introduction of permanent structural change in the way that we work allied with capacity reductions and cuts in external spend.
"Returning the business to profitability requires permanent change across the company and it's disappointing that our cabin crew union fails to recognise that. Structural change has been achieved in many parts of the business and our engineers and pilots have voted for permanent change. I would like to thank our staff across the airline for their outstanding loyalty during this demanding period and our customers for their continued support.
He added, "The current financial year could hardly have had a worse start with the unprecedented closures of UK airspace following the eruption of the volcano in Iceland. This added to the aviation industry's current financial woes while highlighting its crucial contribution to the economy. We are pleased that the European Commission has agreed that national governments can compensate airlines for the losses incurred. We are not looking for a bail out, only for compensation for the losses caused by the airspace closure which was something completely out of our control.
Richard Hunter, Head of UK Equities at Hargreaves Lansdown Stockbrokers, commented, "Britain's most beleaguered airline has slumped to a record loss, yet the resilience of the shares remains striking.
"The loss was slightly less than investors had feared, and the cost cutting programme has almost equalised the overall loss of revenue. The company's ongoing issues are numerous, however, and a root and branch structural change is clearly necessary. The pension deficit, lessening business travel, fierce competition, staff unrest and the volcanic dust cloud will continue to weigh on the company's ability to keep its head above water. Meanwhile, the rather better news comes in the form of the Iberia and potential American Airlines tie-ups, whilst business travel demand has reportedly improved over recent months.
"In all, there is much being done but there is even more to do. The shares have lost some 11% over the last three months, against a wider FTSE100 drop of 8%. Investors are clearly impressed with the company's efforts, despite the numerous headwinds, and the general market view is that the BA is a cautious buy for those of a steely disposition."
By 09:16 shares in British Airways were down 0.38 per cent on the FTSE 100 to 185.80 pence per share.