BA counts cost of move to Terminal 5

Heathrow airport Terminal 5

British Airway’s move to Terminal 5 this month, plus rising fuel costs and the gloomy outlook for the airline industry, have contributed to a profits warning and fall in the airline’s share price.

BA’s move to T5 from 27 March will cost it around £35 million. “Fuel costs are expected to be up by some £450 million to £2.5 billion, an increase of 20 per cent. Non-fuel costs are expected to rise 3 - 3.5 per cent. Total costs, excluding fuel, are forecast to be up £200 million,” said the airline in a statement on its annual Investor Day.

As a result of these increased costs British Airways is forecasting an operating profit of around 7% for 2008/9. "The outlook for next year is consistent with economic slowdown, the impact of increased fuel costs and one-off Terminal 5 transition costs, all of which analysts have already factored in to their expectations," says BA chief financial officer, Keith Williams. The City was not impressed, however, as BA shares fell by more than 7%.

BA’s latest passenger figures for February show that load factors – the percentage of seats filled – increased by just 0.6% to 68.4%. There was a 15.1% increase in premium traffic and a 3.4% rise in non-premium traffic.

“Long haul premium traffic remains strong, while short haul premium and long haul non-premium continue to show weakness,” said BA in a press statement. This confirms the airline’s dependence on business class travel.

During February BA increased fuel surcharges on all long haul flights, from £48 to £53 one way on flights of less than nine hours, and from £58 to £64 one way on flights of more than nine hours. Fuel surcharges on short haul flights remained unchanged at £10 one way.

This is going to be an important month for BA as Heathrow Terminal 5 opens on 27 March and there is the threat of strikes by BA pilots which could cause travel chaos over the Easter holiday period.

Written by: Nick Purdom


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BA Counts Cost Of Move To Terminal 5