British Airways has followed Europe's two other traditional leading airlines, Lufthansa and Air France-KLM, in revealing a major profit and revenue slump for the second quarter of 2009. The airline also announced cuts in schedule and on-board service to counteract the poor financial performance.
In sharp contrast to the Big Three, the two leading European low-cost carriers, Ryanair and EasyJet, returned improved figures over the same quarter, both claiming they are picking up passengers at the expense of mainstream airlines. Many of these customers are corporate travelers.
According to a memo to staff at one professional services company, two of its top 10 airlines in the United Kingdom are now budget airlines. "This would have been unimaginable a few years ago, but is a real reflection of how the firm's travelers have changed their behavior when traveling on business," the memo said. "In a climate where traditional airlines are struggling (to say the least), no-frills carriers are weathering the storm."
BA converted a profit of £35 million for April to June 2008 into a loss of £94 million this time around. "Trading conditions continue to be very challenging with underlying revenue down 16.8 percent and no visible signs of improvement," said chief executive Willie Walsh. "While traffic volumes are down considerably compared to last year, they have stabilized during the quarter and show some signs of improvement for the peak summer months."
BA's revenue decline was slightly less calamitous than for its two main competitors.
Lufthansa was down 19 percent and
Air France-KLM 20.5 percent. Nevertheless, the U.K. flag carrier is taking aggressive remedial action, including parking 22 aircraft for the winter schedule, which will have 5 percent lower capacity than in 2008. Schedule cuts include newly announced frequency reductions on routes from London Heathrow to New York JFK, Newark, Chicago, Seattle and Johannesburg. BA also is delaying the delivery of its first dozen Airbus A380s.
On-board service is facing cutbacks as well. BA no longer will serve sandwiches in economy class after 10 a.m. on flights of less than 2.5 hours. The pre-10 a.m. breakfast service will be retained, as will full-scale catering in business class.
Meanwhile, EasyJet grew its revenue by 12 percent over the same period. The airline did not reveal its profitability for the quarter, but said it expects to make a pre-tax profit of £25 million to £50 million for the full year to Sept. 30. Revenue per seat increased by 10.9 percent to £51.42, and passengers grew by 2.9 percent, predominantly in continental Europe. EasyJet said it is "targeting growth in markets from which weaker competitors are retreating."
Also in characteristically bullish mood is Ryanair, which saw profits shoot up from €21.0 million to €136.5 million, principally on the strength of a 42 percent reduction in fuel costs. Passenger numbers rose 11 percent but this growth was cancelled out by a 13 percent reduction in average fares. In a statement accompanying the figures, chief executive Michael O'Leary said the recent financial woes of Lufthansa could be attributed to competition from his airline, which is increasingly switching aircraft from the British Isles to continental Europe.