British Airways is losing money like it’s going out of fashion. Its pre-tax losses amount to almost £1bn during the past two years. At least BA is not alone: Air France-KLM lost €1.5bn during its “annus horribilis” last year. These are not just recessionary hits – the global airline industry was barely profitable even before the downturn and has failed consistently to generate a return on invested capital that covers the cost of capital.

Willie Walsh, BA’s chief executive, recognising this, has been trying to make permanent changes to the company’s cost base. He has had some success, too, shedding 3,800 staff last year (a 10th of the global workforce) and arranging tie-ups with American Airlines and Iberia that could in time generate annual cost savings of about £350m a year for BA.

Given that, will the improving global economy lift BA swiftly into the black? Probably not. Its operating costs (excluding fuel) are still too high at almost 75 per cent of revenue; Singapore Airlines manages 65 per cent. And while global passenger demand is improving more quickly than thought – up 10 per cent on last year in March – Europe is weaker than Asia and the US. BA expects its revenue to rise just 6 per cent this year and hopes to break even at the pre-tax profit level.

Even that modest goal is hostage to fortune on several fronts. First, cabin crew walk-outs are set to return. Seven days of strikes in March cost BA about £40m; the next batch will last twice as long. Then there is the changeable price of oil. Last year’s lower prices reduced BA’s costs more than all of Mr Walsh’s cuts put together. Finally, Iceland’s volcano might keep on rumbling for years. Just this week it disrupted hundreds of flights before a south-westerly breeze blew the ash away. Investors hoping for a clear picture of BA’s future might as well throw straw in the wind.

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