Dan Milmo
The Guardian
British Airways will raise fares, slash flights and consider cutting its orders for new aeroplanes as the flag carrier prepares to follow a year of record profits with its toughest 12 months since 2001.
BA staff secured a £35m windfall yesterday after the airline hit its 10% profit margin target for 2008 but analysts warned that the coming years may be bonus-free as a high oil price and a weak global economy pose a fundamental threat to the industry.
Willie Walsh, BA’s chief executive, reiterated his determination to guide BA through the storm as he atoned for the Terminal 5 fiasco by waiving the £700,000 bonus he should have received for overseeing pre-tax profits of £883m.
The airline is expected to reduce services in the winter as a rising global oil price threatens to push its fuel bill to more than £3bn this financial year.
Douglas McNeill, an analyst at Blue Oar Securities, said the airline would cover the cost increase by raising fares, which would squeeze out discretionary travellers and make the carrier reliant on must-travel customers such as business passengers. “They seem to be charting a course which will see them sacrifice volume for price rises. They hope to push through price rises and see the customer base become less price sensitive as a result. You are then left with customers that have a need to travel. That’s a plausible hope but it remains to be seen whether it works in practice,” he said.
BA added that it might drop options to buy 18 Boeing 787 jets and seven A380 superjumbos on order from Airbus, reflecting fears that a prolonged slowdown in demand will saddle airlines with aircraft that cannot be paid off due to high fuel costs and lower-than-expected demand.
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