BA losses widen on strike action, ash cloud

LONDON: British Airways on Friday said net losses widened to 122 million pounds during its first quarter as strike action and the Icelandic ash cloud grounded flights, but insisted it was set to break even.

BA, which is looking to merge with Spain's Iberia, said losses after tax rose 15 percent to an equivalent of 146 million euros or 191 million dollars in the three months to June 30 compared with the group's first quarter in 2009/10.

"Despite both revenues and cost being hit by the closure of UK airspace following the Icelandic volcanic eruption and the impact of industrial action, our financial performance improved during the quarter from underlying revenue increases and further cost reductions," BA chief executive Willie Walsh said.

BA added in a statement: "While some economic experts are flagging the risk of a 'double dip' recession, the steady recovery continues and, on that basis, we continue to target to break even at a profit before tax level for the full year."

The troubled airline on Friday added that group revenue fell 2.3 percent to 1.937 billion pounds in its first quarter, while pre-tax losses rose almost 11 percent to 164 million pounds.

BA, which suffered record annual losses in 2009/10 on slumping sales amid the severe economic downturn, was hit at the start of its new trading year by the ash cloud chaos and a bitter row with cabin crew over pay and perks.

Staff have meanwhile rejected the airline's latest offer to end their long-running dispute, raising the prospect of fresh strikes.

Derek Simpson, the co-leader of Britain's largest union Unite, said on Friday that while he was sorry to see BA lose money, the carrier was wrong to impose changes to cabin crew working conditions without agreement.

"You have to question the direction and sense of the management, particularly its chief executive who wants to impose change in a bid to put up profits, without the support of staff," Simpson told BBC radio.

In a bid to turn around its fortunes, BA is seeking to merge with Iberia and forge a trans-Atlantic alliance with American Airlines.

BA took a step nearer completing its tie-up with Iberia in June after agreeing a recovery plan to address its employees' pension deficit.

The pensions deficit had been a major sticking point and Iberia still has the option to call off the planned merger should it not agree with the arrangement struck between BA management and trustees.

British Airways and the Spanish airline signed a deal on April 8 to create one of the world's biggest airlines to compete more effectively in the fast-consolidating industry.

The tie-up will create Europe's second-biggest airline by market value after Lufthansa, combining Iberia's strong position in Latin America with BA's presence in Africa, Asia and North America.

The merger, which requires regulatory and shareholder approvals, is on track for completion later this year.

In May, BA announced a record annual pre-tax loss of 531 million pounds.