BA reports surprise third-quarter profit

British Airways bucked expectations by reporting a small quarterly operating profit for the first time in more than a year on Friday as the impact of its contentious cabin crew changes and other cost-cutting measures began to kick in.

Falling fuel costs also helped produce better-than-expected results for the three months to the end of December but Willie Walsh, chief executive, warned “we still expect to make record losses” over the full financial year.

However, analysts were broadly impressed with what appears to be the strongest sign yet that the struggling flag carrier, which made a £401m pre-tax loss last year, is finally heading for recovery.

“It looks as though the revenue environment is past the worst and BA’s work on cost control is supporting results,” said Andrew Lobbenberg of RBS. “But there remains considerable uncertainty at the moment relating to industrial relations as well as the major strategic issues still pending resolution.”

BA’s 12,000-plus cabin crew are voting in their second strike ballot in three months over the airline’s decision in November to cut crew numbers by at least one on most long-haul flights.

The last ballot was overwhelmingly positive and led to a threatened 12-day strike over Christmas, averted only when a court ruled it invalid because staff leaving BA had voted.

Keith Williams, BA finance director, told analysts on Friday that the impact of that threatened walk-out had been “very modest as most Christmas trips were already sold in advance”.

Mr Walsh told the Financial Times that poor January traffic figures, which BA also released on Friday, were “purely a result of weather in January”, when snow hit airports across the UK and Europe, rather than the potential walk-out.

In a sign of the tensions over the latest ballot, which closes on February 22, Mr Walsh said he did not believe the cabin crew’s Unite union could come up with “credible savings” to replace those BA had generated, and insisted he would not replace the crew taken off aircraft.

“We’re very comfortable with the decision we’ve taken to reduce crew,” he said. “There’s no question it’s the right thing to do.”

Mr Walsh also said he was still hopeful US authorities would approve BA’s transatlantic joint business with American Airlines and that the merger with Iberia that BA announced last year was on course.

BA produced a third-quarter operating profit of £25m, its first since the second quarter of the previous financial year.

It suffered a £50m pre-tax loss for the quarter, taking its losses for the first nine months of this financial year to £342m. This was well below many analysts’ forecasts but much worse than the £70m pre-tax loss seen in the same period in the previous financial year, and means it will suffer two consecutive years of losses.

While its cost-cutting has been impressive over the nine months to the end of December, when full-time equivalent staff numbers fell from 40,627 to 36,758, its revenues were down nearly 13 per cent as it continued to face weaker demand for business class seats.

Shares in BA closed down more than 2.5 per cent.