BA hit with record £45m losses

British Airways has plunged to a worst-ever first-quarter loss of £45 million after what was described by its chief executive Rod Eddington as "the most testing period in aviation history".

The Heathrow-based carrier was hit by a disastrous combination of setbacks - principally the Sars virus outbreak and the impact of the war in Iraq - which put people off flying at a time when demand was already depressed by the weak state of the world economy.

There was also a warning that last week's wildcat "swipe card" strikes at Heathrow will wipe a further £40 million off profits this year and that the action has hit forward bookings.

The Heathrow dispute, which was settled last night, will have done further damage to the airline's reputation and its relations with its staff, some 11,200 of whom have already lost their jobs through a cost-reduction programme.

Mr Eddington said: "The direct cost of the unofficial industrial disruption in July will be in the range of £30- to £40 million, reflecting both the costs incurred by the action and the lost revenues.

"The uncertainty has also impacted on forward bookings and will reduce revenues. We will work hard to restore BA's reputation with our customers."

The £45 million loss, which covers the three months to the end of June, compares with a £65 million profit for the same period last year.

The first quarter is normally one of the most profitable periods of the year for BA because it covers the early part of the summer holiday season.

Today's figures also reveal just how hard BA has had to fight to stop its passengers deserting in droves to rivals, particularly to low-cost carriers such as Ryanair. Although its planes were more fully booked than the same period last year, with 78 per cent of the seats occupied, it has had to slash fares.

Its revenues in the the first quarter were down by more than 10 per cent to £1.8 billion with yields - the key measure of how much profit it makes per passenger - down by 12.7 per cent.

BA chairman Lord Marshall said: "The demand for air travel, while improving, remains unpredictable." However, he warned that revenue in the second quarter of the year will be lower than the same period in 2002.

The loss, although slightly smaller than the City's worst fears, means that BA is almost certainly heading for a fall into the red for the year as a whole. Some analysts are now braced for a deficit of up to £200 million, equalling its worst since privatisation in 1987.

Two years ago, BA lost £200 million after a savage downturn in bookings following the September 11 attacks. It recovered strongly to record a £135 profit last year before being hit by the latest broadside of bad news.

Meanwhile, BA and the unions today both claimed victory in the "swipe card" dispute which caused massive disruption for 80,000 passengers.

There will now be six weeks of detailed negotiations before it becomes compulsory for check-in and ground staff to use the electronic cards - at the centre of the damaging dispute - to clock in and out of work.

Mervyn Walker, BA's director for Heathrow, said: "This is not about us or the unions backtracking. We have both changed our perspective."

Under the deal, drawn up in a twopage document, BA makes clear that the purpose of the card is "solely to record the check-in and check-out time of each employee on each occasion they attend work".

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