BA Plans Both Cuts, Investments

British Airways is initiating a two-year program that aims to slash costs by £450 million, while bolstering customer services through further investments, the carrier said today during an investor conference.

BA said its new business plan is the first since Willie Walsh took the helm last year and calls for £225 million in cost cuts this year and 2007 and an additional £225 million the following year. Meanwhile, the carrier said it would invest nearly £200 million to add a new Club World seat and on-demand films in all cabins.

As BA prepares to consolidate its Heathrow operations in Terminal 5 by March 2008-a spokesperson today said terminal construction is nearly 50 percent complete-the carrier said it is initiating new procedures, "aimed at major improvements in punctuality, and baggage performance... plus greater use of self-service checkin," BA said in a statement today.

The airline today also forecasted fuel costs to grow by roughly £400 million for 2006 and 2007, yet BA anticipated revenue to increase by up to 5 percent during that period, "driven by increased capacity and seat factors," the carrier said in a statement. BA has no plans to adjust its fuel surcharges, BA CEO Walsh said.

"This plan will make us fit for the future," Walsh said in a statement. "By resolving our pensions deficit, reducing cost and delivering world-class customer service, we can make a 10 percent operating margin a sustainable reality. Better management of our costs and having an absolute focus on customer needs will give us a lasting platform for success. Meeting the business plan's objectives will put us in a position to take on our competitors in preparing for growth."