British Airways reports record annual loss of 531m

LONDON (AFP) - – British Airways on Friday posted a record annual pre-tax loss of 531 million pounds (609 million euros, 765 million dollars) on slumping sales but forecast it would break even this year.

BA, which faces a cabin crew strike next week, said its net loss widened to 425 million pounds in the 12 months to March from 358 million pounds in the previous year. Revenues tumbled 11.1 percent to 7.99 billion pounds.

"This is our second consecutive year of record losses but we take heart from the fact that, while our revenue has fallen by one billion pounds, so have our costs," Chairman Martin Broughton said in a statement.

Market expectations had been for a larger pre-tax loss of 600 million pounds after the group had a smaller shortfall of 401 million pounds in the previous 2008/2009 financial year.

The airline, which is slashing costs and merging with Spanish rival Iberia in a bid to return to profitability, has been hammered by the global economic downturn which has hurt demand for air travel.

Other airlines have also suffered badly, with peer Air France-KLM earlier this week announced record losses of 1.55 billion euros in its year to March.

BA said Friday that it cut almost 3,800 jobs, or about 9.4 percent of its total workforce, during the 2009/2010 financial year. Since September 2008, it has axed more than 6,000 positions in total.

British Airways said it was aiming to break even in the current 2010/2011 financial year.

"Market conditions are showing improvement from the depressed levels in 2009/10," the company said.

"Cargo is showing significant signs of improvement. Passenger revenue is recovering, with increased corporate activity, particularly across the Atlantic.

"On the basis of these market improvements, we are targeting revenue growth of some six percent and breakeven at the profit before tax level."

BA cabin crew plan to go ahead with a five-day strike next week after a court upheld their right to stage the action on Thursday, according to officials at the Unite trade union.

The strike is set to begin Monday. Two further five-day strikes, starting on May 30 and June 5, will also go ahead if the dispute is not settled.

Unite won an appeal on Thursday against a court injunction which had blocked a planned stoppage in the long-running row over pay and conditions.

Group chief executive Willie Walsh lashed out at Unite.

"Returning the business to profitability requires permanent change across the company and it's disappointing that our cabin crew union fails to recognise that," he said in the results statement.

"Structural change has been achieved in many parts of the business and our engineers and pilots have voted for permanent change."

But joint Unite leader Derek Simpson fought back, telling BBC radio on Friday that there was a "total lack of confidence" in BA management.

Cabin crew staged walkouts in March which were marked by sharp disagreements between the union and BA over the impact of the industrial action.

Walsh added Friday that the Iberia merger was on track to complete in late 2010 and would lead to annual cost savings of 400 million euros after five years.

The combined company will be known as International Airlines Group, with both BA and Iberia retaining their separate operations and brands.

The results did not show the impact of the volcano ash chaos which occurred after the end of BA's financial year.

BA said earlier this month that passenger numbers fell by almost one quarter in April as a result of travel chaos sparked by a huge ash cloud from an Icelandic volcano.

"The current financial year could hardly have had a worse start with the unprecedented closures of UK airspace following the eruption of the volcano in Iceland," Walsh said.

"This added to the aviation industry's current financial woes while highlighting its crucial contribution to the economy.

"We are pleased that the European Commission has agreed that national governments can compensate airlines for the losses incurred."

Airspace across Europe was closed for up to a week last month after Iceland's Eyjafjoell volcano began spewing a cloud of ash on April 14. The shutdown was the biggest in Europe since World War II.