BA profits hit by summer security alert

A larger-than-expected impact from the summer security alert saw British Airways post a fall in second-quarter profits yesterday.

Europe's third-largest airline also trimmed its full-year revenue growth forecast after the increased security disruption cost it £100 million (€149 million) in the quarter, but said its fuel bill would be lower than expected after oil prices fell.

"The company is performing well, but results this quarter were hit by 30 per cent higher fuel prices and revenue weakness following the security-related disruption in August," Panmure analyst Gert Zonneveld said in a note.

The airline said its operating profit for the three months to the end of September fell 8 per cent to £240 million, down from £261 million a year ago.

The operating result was £134 million after the inclusion of an impairment charge of £106 million on the sale of its struggling regional subsidiary BA Connect to UK airline Flybe. BA will own a 15 per cent stake in Flybe under the deal.

Pretax profit for the quarter fell 27 per cent to £176 million due to the impairment charge, higher fuel costs and the security disruptions, offset in part by a £48 million gain on the sale of its holding in data management firm World Network Services.

Chief executive Willie Walsh said the security scare in August, which forced it to cancel hundreds of flights out of London airports, had cost it £100 million in the quarter. This was well above BA's original estimate of £40 million but in line with analysts' expectations.

BA's passenger traffic was hurt in September and October due to the restrictions on hand luggage, which deterred some passengers from flying, although Mr Walsh said forward bookings were returning to normal. Passenger traffic rose 1.1 per cent in October, the airline said.

It said its full-year revenue was expected to rise 4.5 per cent to 5 per cent, down a half a per cent from its previous guidance.

The airline also said it expected its fuel bill to be £400 million higher this year, an improvement from a £450 million rise forecast previously.

Mr Walsh told reporters on a conference call that he was confident of reaching a deal with unions this month to tackle its pension deficit.

BA needs to resolve the pensions issue ahead of plans to replace its ageing fleet of Boeing aircraft.

Mr Walsh said there were no immediate plans to divest anymore businesses.