BA warns it will cut flights as prices rise
British Airways told investors yesterday it would raise prices, cut flights and would do well to break even in 2008.
Speaking at the annual shareholders meeting in London, chairman Martin Broughton said: “It will be a considerable achievement for BA to break even this year.”
He added: “With oil at $85 a barrel – a price not seen since February – we would still be on course for a pretty impressive profit.” Broughton continued: “But the nearer the oil price moves to $125, the nearer we would come to the red. And with the oil price stabilising around where it has been for the past few weeks, the implications are obvious.”
Broughton said extra fuel costs this year were likely to be in the region of more than £1bn. He said: “At the start of this decade fuel represented less than 10 per cent of our total costs. This year we expect it to represent more than 35 per cent. So if we do nothing we’ll be heading for a loss.”
Chief executive Willie Walsh added flight prices could rise by more than four per cent due to potential increases in fuel surcharges as well as higher fares. He said: “I think it’s absolutely inevitable that prices will go up. Fares will have to go up.”
He warned that there could be up to a 5 per cent cut in growth for the airline’s winter programme – which runs for six months from October – and could include culling some short haul flights.
Walsh said: “We are reviewing our flying programme to see where it is prudent to reduce capacity in the current economic climate.” He added: “The fuel efficiency of different aircraft types is a factor in our consideration – but so is the interests of customers.”