Record losses at British Airways

British Airways has recorded a record financial loss of £531 million for 2010.

A fall in revenue, industrial action and disruption caused by volcanic ash all pushed losses beyond the 2009 figure of a £401 million loss.

The figure is the worst since the airline was privatised in 1987, but lower than analyst predictions of a £600 million loss.

Revenues at BA were down £1 billion on the previous year, BA said, though the airline managed to cut costs by nearly £990 million - with £600m in savings coming from lower fuel costs.

“Despite a £1 billion drop in revenue during the year, our determined efforts on cost control mean costs have reduced at a comparable level and our operating loss is virtually the same as in the previous year,” said BA chief executive Willie Walsh.

“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.”

Strikes Loom

The annual report comes ahead of further strike action at British Airways.

The Appeal Court yesterday overturned a BA injunction banning the Unite union from pursuing industrial action.

The decision means up to 15 days of strike action could now resume as early as next week.

Strikes to date have cost the airline £43 million, with cabin crew walking out earlier this year in a dispute over pay and conditions.

Mr Walsh used the results to criticise the ongoing dispute: “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.

Disruption caused by airspace closures due to volcanic ash is also likely to have hit BA financially, but losses were not singled out by the airline.

American Airlines launches new Manchester to New York flight

Today, American Airlines, a founding member of the oneworld® alliance, inaugurated its new Summer seasonal nonstop service between Manchester and New York JFK and brought a little flavour of the Big Apple to the Northwest in the process.

Passengers departing on the first flight were treated at the gate to a glass of bubbly while also being entertained and helped into that New York state of mind with the presence of a living Statue of Liberty. A ribbon cutting officially opened the new flight before passengers were given a special commemorative gift in what appeared to complete the celebrations before the flight made its scheduled departure. As part of a final farewell to the special flight, however, a New York taxi then led out the Boeing 757 aircraft from its stand to the runway and to the excitement of all who were watching.

Speaking at Manchester Airport’s Terminal 3 this morning, Graham Bell, Director of Sales UK & Ireland, American Airlines, commented: ““We are delighted to be launching a second daily flight from Manchester to the US. American has been flying between Manchester and the US for nearly 25 years, which serves to demonstrate how committed we are to our Manchester operations and also gives us the distinction of being the airport’s longest continuously serving carrier to the US. We very much appreciate the region’s support which has enabled us to offer this new service and we believe the new service will prove just as popular as our existing Chicago route.”

Andrew Harrison, Commercial Director for Manchester Airport, said: “We are delighted that American have shown their commitment to Manchester by adding the JFK route. They first came to us in 1986 with a daily service to Chicago and have nearly reached their 25th anniversary here. It’s partnerships such as these that have enabled the airport and the region to flourish and we look forward our next 25 years together.”

The new daily flights are operated using an internationally configured Boeing 757 aircraft with 182 seats, including 16 lie-flat Business Class seats and 166 seats in the main cabin. The new flight enables non-stop travel to one of the most popular US cities, as well as increased and more convenient connections to around 40 popular onward destinations across the Americas and Caribbean.

To celebrate the new flight, members of the American Airlines AAdvantage loyalty programme will be able to earn 10,000 AAdvantage® bonus miles for each Business Class roundtrip flown on the route, or 5,000 bonus miles for travel in Economy Class. The number of times the bonus miles can be earned is unlimited, so sit back and watch the miles add up!

To participate in this limited-time offer, passengers simply need to register prior to travel and fly between May 14, 2010 and June 30, 2010 on the new non-stop flight. Registering is easy – just visit www.aa.com/offers, click on Airline offers “View All” to locate the Manchester offer, then use bonus code NYMAN. If you’re not already an AAdvantage member, it’s free and easy to enrol by visiting www.aa.com/enroll.

New ash flight rules set to come into force

New measures developed by the Civil Aviation Authority (CAA) are due to come into force today in an effort to reduce disruption caused by volcanic ash.

Following “positive” talks between airlines, regulators, and aircraft and engine manufacturers, the CAA has developed a new Time Limited Zone (TLZ), allowing aircraft to fly through higher volumes of ash for shorter periods.

Based on new research, aircraft and engine manufacturers have agreed it is safe to allow operations in the new zone for a limited time, reducing the need for full air space closures.

To operate in the new zone airlines need to present the CAA with a safety case that includes the agreement of their aircraft and engine manufacturers.

UK airline Flybe is the first to achieve this and will therefore be able to use the new zone from midday today.

CAA Criticism

While all UK airspace is presently open, the CAA has come into strong criticism from airlines following the repeated closure of UK airspace in April and May.

British Airways’ chief executive Willie Walsh earlier branded closures “a gross over-reaction” to a “very minor” risk.

Virgin Atlantic president Sir Richard Branson called the closure of Manchester airport on Sunday “beyond a joke”, while Ryanair chief executive Michael O’Leary has said reliance on “outdated, inappropriate and imaginary” computer-generated volcano concentration charts is “ridiculous”.

New Measures

Announcing the change CAA chief executive, Andrew Haines, said: “Unprecedented situations require new measures and the challenge faced should not be underestimated.

“Firstly because the standard default procedure for aircraft that encounter ash, to avoid it completely, doesn’t work in our congested airspace.

“Secondly, the world’s top scientists tell us that we must not simply assume the effects of this volcano will be the same as others elsewhere.

“Its proximity to the UK, the length of time it is continuously erupting and the weather patterns are all exceptional features.”

The introduction of the TLZ is based on measurements collected from test flights through the current ash cloud over the past month, as well as on data and evidence compiled and analysed from previous volcanic ash incidents combined with additional analysis from manufacturers.

Operations in the newly established zone may be subject to time limits and increased maintenance practices.

The new Zone’s area will be established using Met Office forecasts, and will be approved by the CAA before operations are allowed within it.

Government calls emergency meeting to avert BA strike

British Airways is in court seeking an injunction to stop the latest strikes by its cabin staff. Meanwhile BA’s chief executive Willie Walsh says he does not expect to make an agreement with unions in time to prevent the first strike going ahead.

The airline is arguing that the latest strikes are illegal because Unite did not follow the rules in balloting its members over strike action earlier this year. In particular, the airline says that Unite failed to follow the correct procedures in notifying its members of the result of the ballot.

BA successfully won an injunction against the planned Christmas strikes in December last year.

A Unite spokesman said the union would “vigorously defend our ballot”.

“We have already responded to the company, and notified them that we have fully complied with the law,” he said.

The UK government has also made a last-minute intervention in the long-running British Airways dispute with cabin crew, calling BA’s chief executive and union leaders for an emergency meeting today.

Ahead of the meeting, the new Transport Secretary, Phil Hammond, said: “This strike is extremely bad news for passengers, British Airways and its employees.”

“I understand how difficult it can be when people’s jobs have to change, but a prolonged series of strikes will weaken the company and put those jobs at risk.

“I urge both parties to resolve their dispute to avoid disruption to passengers and safeguard the future of British Airways.”

BA chief executive, Willie Walsh, said that he would consider taking on new cabin crew once the latest strike was over to ensure “100 percent service” in case of another dispute.

Walsh said he expected 70 percent of flights to run during the series of strikes.

“Resolution is always possible,” Mr Walsh said. He said that “in the end cabin crew will vote with their feet” and continue returning to work in large numbers.

BA is also reporting its annual results this week and is expected to reveal record losses of up to £600m. This would come on top of a £401m pre-tax loss last year.

The figures will not include losses from the volcanic ash crisis, which will be in the following year’s results.

Ash cloud forces closure of Heathrow and Gatwick

Heathrow and Gatwick have become the latest airports to be closed amid fresh fears about volcanic ash from Iceland.

The Civil Aviation Authority has decided to shut the two key London airports from 1am Monday as a safety precaution.

It follows a day of closures throughout the North and Midlands, rendering much of the UK a no-fly zone.

A no-fly zone was first put in place above parts of Northern Ireland on Sunday and the Civil Aviation Authority later extended the closures, with Manchester, Liverpool,
East Midlands and Glasgow Prestwick, all shut from 1pm.

Air traffic control service Nats tonight said that more airports would be forced to close.

A spokesman said: ‘For the period 1900 Sunday until 0100 Monday, London’s main airports will still be clear of the no-fly zone imposed by the CAA due to the high density volcanic ash cloud.

‘The ash cloud continues to change shape and move further south to just north of Oxford during this period.

‘This brings Birmingham and Norwich inside the no-fly zone in addition to those airports already affected.

‘The northerly extent of the no-fly zone in England now includes Teesside, stopping just short of Newcastle, and tracking north west in a line just north of Carlisle, which remains in the no-fly zone.

‘Airports inside the no-fly zone in England and Wales now include Teesside, Humberside, Leeds Bradford, Blackpool, Ronaldsway, Caernarfon, Liverpool, Manchester, Sheffield, Doncaster, Norwich, Birmingham and East Midlands.

‘In Scotland the no-fly zone includes the Western Isles, Campbeltown, Prestwick and Oban.

‘All airports in Northern Ireland remain inside the no-fly zone during this period.’
Flights in and out of Dublin are also grounded until at least 9am tomorrow and other Irish airports have also been closed by the cloud.

Although they are currently outside the no-fly zone, it’s thought Heathrow, Gatwick, Luton and Stansted in the South could be affected over the next three days.
Forecasters say the cloud is expected to be lying over London by Tuesday but should have drifted out of UK airspace by Wednesday.

The Dubai-based Emirates Group has reported record profits for financial 2009-10, despite the global economic slowdown.

In a difficult market, the group’s net profits for the financial year ended March 31st 2010 increased 248 per cent to US$ 1.1 billion.

Revenue at the group – which comprises of Emirates Airline, Dnata and subsidiary companies - remained stable at US$ 12.4 billion, reflecting lower passenger and cargo yields offset by increased traffic.

The Group profit margin improved to 9.1 per cent from 2.6 per cent a year earlier.

At a news conference earlier today group chief executive, HH Sheikh Ahmed bin Saeed Al Maktoum, said: “It has been an exceptional year of continued profitability against a backdrop of the worst global recession in generations.

“The first half of the financial year however, was extremely challenging as the world continued to grapple with the economic crisis.

“Our pioneering spirit and ability to adapt in adverse conditions helped us to push through this harsh economic climate with an extremely strong performance in the latter part of the year.”

Some 27.5 million passengers flew with Emirates over the financial year, up by 4.7 million when compared to the previous year. Further, Dnata’s international ground handling operations spread to 20 airports in nine countries.

“Time and time again Emirates has weathered adversity. We have operated through regional conflict, SARS, the Asian economic collapse and most recently the global recession,” added Sheikh Ahmed
“The increase in passenger numbers is attributable not only to our position at the centre of the new Silk Road between East and West, but also to our commitment in increasing our network and service standards, during a time where many competitors were doing the opposite.”

Emirates Airline’s revenues remained stable at $US 11.8 billion, an increase of 0.4 per cent from the previous year. Airline profits of US$ 964 million marked an increase of 416 per cent over 2008-09’s profits of US$ 187 million.

Profits were assisted by a significant fall in the cost of aviation fuel during the year.

The airline launched passenger services to three new destinations – Durban, Luanda and Tokyo – in financial 2009-10 and increased frequencies onto existing routes in high-demand markets.

Iraq

Joining what is a growing market, Emirates confirmed earlier this month it will begin flights to Delhi in July – one of six new routes planned for this year.

The airline explained the decision to add Baghdad flights was made because of signs Iraq is stabilising more than seven years after the 2003 US-led invasion.

The flights are also a possible sign of increased Arab investment in Iraq’s oil and commercial sectors.

Earlier this month, FlyDubai and Qatar Airways said they are considering adding routes to Iraq, while in April Abu Dhabi-based Etihad Airways began Baghdad service.

BA to operate at least half of services through strikes

British Airways plans to run at least half its flights from Heathrow Airport during the cabin crew walk-out next week.

The UK flag carrier has also made arrangements with more than 50 other carriers to allow their customers disrupted by the five-day strike to rebook.

BA says it plans to run 60 per cent of long-haul and 50 per cent of short-haul flights from Heathrow during the strike.

Cabin crew union Unite says it is planning four strikes of five days each, with just one day between. This could lead to disrupting services for over three weeks.
BA said it plans to fly more than 60,000 customers each day of the strikes next week, adding that Gatwick and London City airports will not be affected by the industrial action.

The airline said it is still available to hold further talks with Unite but wants customers to have early warning of its flying schedule to allow sufficient time for alternative travel arrangements to be made.

Willie Walsh, BA’s chief executive, told The Telegraph: “Unite’s leaders have deliberately targeted the busy half-term holidays to cause as much disruption as possible for hard-working families looking to spend some well-earned time away.

“We are confident that many crew will ignore Unite’s pointless strike call and support the efforts of the airline to keep our customers flying.

“As the new Government starts addressing the enormous economic challenges facing the country, it is sad that Unite’s priority is to seek to damage Britain’s links with the world.”

“We remain absolutely determined to resolve the dispute and our door remains open to Unite, day or night. It is not too late for Unite to call off this action and protect its members’ job security.”

Unite announce further strike dates at BA

The Unite union has confirmed 20 further days of industrial action at British Airways in a dramatic escalation in its ongoing battle with the airline.

Following the “overwhelming” rejection of the company’s latest pay offer by cabin crew in a ballot last week, Unite confirmed dates for four strike periods in May and June.

The first strike will take place on May 18th-22nd inclusive, followed by strikes beginning on May 24th, May 30th and June 5th.

Each strike will last for five days.

Unite’s joint general secretaries Derek Simpson and Tony Woodley said: “Passengers and investors alike will be dismayed that British Airways’ management rejected an approach by the union over the weekend, after their offer had been comprehensively turned down by their own employees.

“Cabin crew are left with no choice but to take further strike action.

“There can be no industrial peace without meaningful negotiations and while management victimises trade unionists and uses disciplinary procedures in a witch-hunt”

“The seven days notice period is sufficient time for BA management to do the sensible thing and reopen meaningful negotiations.”

Unite is also intending to hold a further industrial action ballot of BA cabin crew over issues which have arisen from the company’s conduct during the dispute.

British Airways

In a statement British Airways responded: “We are disappointed that Unite, the trade union for British Airways cabin crew, has announced that it intends to take further strike action.

“We are currently considering our response so we can minimise any disruption during this strike period.”

Contingency plans during the last strike saw the majority of the airline’s short-haul services depart as normal, while a number of long-haul services were also able to operate.

Details of the latest pay deal were not given by British Airways.

However, Unite said BA had failed to restore the travel perks it withdrew from staff involved in the previous strikes in March.

Those stoppages grounded hundreds of flights and cost BA an estimated £45m.

Reports have suggested this change in focus – away from pay and conditions and toward mitigation of damage caused by previous strikes – may offer British Airways an avenue to legally challenge the latest action.

British Airways price-fixing trial collapses

The trial of three former British Airways employees and one current member of staff over allegations of price-fixing has collapsed at Southwark Crown Court.

Prosecuting QC Richard Latham told the judge he would offer “no evidence” in the trial, after questions were raised over the prosecution’s case on Friday.

Addressing the court Mr Justice Owen suggested he had considered “whether the manifest failures on the part of the prosecution are such as to render a fair trial impossible”.

The four have been on trail since April.

BA’s head of sales Andrew Crawley, ex-commercial director Martin George, ex-communications head Iain Burns and ex-UK and Irish Republic sales chief Alan Burnett all denied the allegations.

Mr George and Mr Burns resigned from BA in 2006, while Mr Burnett retired in the same year.

Mr Crawley remains in his role.

Virgin Atlantic

The charges relate to price-fixing over a period of 18 months between July 1st 2004, and April 20th 2006, when fuel surcharges rose from £5 to £60 for a typical long-haul return ticket.

The court had earlier heard the four defendants agreed with each other and sources at Virgin Atlantic “to make and implement agreements which would lead, and which in fact did lead, to price-fixing”.

However, the court was told on Monday the Office of Fair Trading (OFT) had failed to disclose information to the defence.

The undisclosed material includes e-mails sent or received by Paul Moore, one of the former employees of Virgin Atlantic Airways, whose evidence the jury was due to start hearing today.

It is believed the material suggested Virgin Atlantic had increased fuel surcharges without consulting British Airways.

Defending of the accused executives William Boyce QC, argued had this e-mail come to light earlier the case may never have come to court.

The four defendants were acquitted by the jury.

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Airlines lose Australian fuel surcharge case

Travel agents in Australia could be set for a financial windfall, following a Federal Court decision stating airlines should be forced to pay millions in additional ticket commissions.

Following a class action involving 1,450 agents last year, the Court has ruled airlines operating out of Australia were not obliged to include fuel surcharges when calculating the commission paid to agents on international ticket sales.

However, this decision was challenged by Leonie’s Travel on behalf of the agents.

Leonie’s reduced the scale of the claim, appealing against Qantas for commissions which should have been paid out on airline tickets sold between 2004 and 2007.

The Federal Court subsequently overturned the previous decision, finding fuel surcharges were not a tax and as such should be made commissionable.

This now leaves airlines – including Air New Zealand, British Airways, Cathay Pacific, Singapore Airlines as well as Malaysia Airline, all of whom were involved in the original case - open to huge liabilities.

Slater and Gordon lawyer Steven Lewis, representing the travel agents, said the case set a precedent and argues the decision could have major implications across the airline industry.

“The court has made a very clear ruling the fuel surcharge is part of the ticket price on which commissions must be paid,” he said.

“The matter was run as a test case to establish the law as it applies to Qantas and the other airlines involved in the class action.

“The time has now come for the airlines, which have been using the fuel surcharge to bolster the bottom line since it was introduced in 2004, to stop fighting the travel agents and resolve this major problem.

Following the decision, Mr Lewis said almost 85 per cent of $16.9 billion in international airline tickets sold in Australia between 2004 and 2006 came through travel agents.

In a statement Qantas said it was “disappointed” but would consider its position.

United and Continental close to merger

United Airlines and Continental Airlines are expected to confirm a merger early next week, with the two Boards expected to meet over the weekend.

With only the final details left to negotiate, the merger will create the world’s largest airline – replacing American competitor Delta Air Lines when measured by passengers carried.

The two aviation giants reconvened for talks earlier this month, more than two years after walking away from a similar deal. However, deteriorating economic conditions have bolstered the need for consolidation in the industry.

United’s fortunes have also since improved.

This week, the airline reported its losses had narrowed in the first quarter while revenue jumped 15 per cent.

The company also said it had $4.5 billion in cash.

Under the terms of the deal, United would be the sole brand for the new carrier, which would be based in Chicago.

According to reports, Continental chairman and chief executive, Jeff Smisek, will become chief executive of the merged carrier while Glenn Tilton, United’s chief executive, would be named the non-executive chairman for two years, after which Mr Smisek would take over that role too.

Market sources are expecting a swap of about 1.057 United shares for each share of Continental when the deal is finalised.

As news of the deal spread trading on the Nasdaq saw United shares down 1.3 per cent to $21.47, while Continental shares were up 2.4 per cent to $22.70 at 16:00EDT today.