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BA meets 1Q estimates
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August 7, 2000: 3:43 a.m. ET
Profit hit by fuel cost surge, competition on North Atlantic routes
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LONDON (CNNfn) - British Airways PLC, Europe's biggest airline, reported a 65 percent slide in pre-tax profits for its fiscal first quarter Monday, hammered by competition on North Atlantic routes and higher fuel prices.
The results were in line with analysts' forecasts.
BA also confirmed it has extended the period of exclusivity for merger talks with Amsterdam-based KLM, Europe's fourth-largest airline. The carriers started talks more than eight weeks ago, and had hoped to file a proposal for a merger with the European Commission this week.
The airline earned £8 million ($12.4 billion) in the quarter ended June 30, excluding one-time disposal losses of £58 million, compared with a net profit of £23 million in the 1999 period. Including one-time charges, British Airways lost £50 million ($75.2 million), compared with a gain of £200 million in the 1999 first quarter.
On an operating basis, the airline earned £97 million ($145.9 million) in the latest quarter, a 3 percent increase over year-earlier results. Operating results also fell within analysts' expected range.
Revenue rose 4 percent to £2.31 billion ($3.47 billion). The airline said it has "cautious optimism" about the revenue outlook for the key summer travel season.
"We remain encouraged by the generally favorable economic climate which prevails in most of our key markets around the world," said British Airways Chairman Colin Marshall. "However, the effect of a persistently strong pound ... and the high cost of fuel gives cause for concern."
British Airways, the world's third-largest airline, is attempting to recover from losses caused by intense competition by low-cost carriers, as well as a series of labor disputes. The company's fading fortunes and a sharp drop in the share price culminated in the ousting of chief executive Bob Ayling in March. Former Cathay Pacific boss Rod Eddington took over the post in May.
A merger between BA and KLM would create the world's second-largest airline, boasting annual revenue of about $20 billion and some 600 aircraft.
But the talks have been bogged down by Britain's relationship with the United States over an open skies agreement. If ownership of KLM passes into British hands, U.S. officials could withdraw the combined airline's right to fly to the United States.
The Netherlands and the U.S. have an open skies agreement that does not restrict flights between the two nations, but Britain and the U.S. have a restricted pact dating back to 1977. Under the terms of that accord, only two airlines from each nation can fly transatlantic routes to and from Europe's busiest airport Heathrow, west London.
BA stock rose 1.5 percent in early London trading Monday to 394 3/4 pence. 
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