British Airways PLC reported a huge fall in its first quarter earnings on Friday, as chief executive Willie Walsh said a combination of soaring oil prices and a global economic slowdown presented “the worst trading environment the industry has ever faced.” BA also announced cuts to its winter flight schedule in a bid to rein in spending in the tough trading climate - cuts that led the carrier to trim its full-year forecast for revenue growth to 3 percent, instead of 4 percent. In a trading update, BA said that its pretax profit in the three months to June 30 was 37 million pounds ($73 million) - an 88 percent plunge from the 298 million pounds it earned in the same period a year ago. Total revenue was up 2.8 percent over the period, but weaker consumer confidence meant that planes over the quarter traveled 73.4 percent full - a 3.4 percent drop from the same period last year. “We are in the worst trading environment the industry has ever faced,” said BA chief executive Willie Walsh. “The combination of unprecedented oil prices, economic slowdown and weaker consumer confidence has led to substantially lower first quarter profits.” BA, which had already experienced a difficult start to the year with the botched opening of its flagship Terminal 5 at Heathrow, said its fuel bill surged 49 percent over the quarter. However, Walsh said that BA's planned merger with Spanish carrier Iberia SA was a positive step for both carriers “particularly against the background of the industry outlook.” The pair announced early this week they were in talks about an all-cash merger, a process that is expected to take several months. BA shares rose 2.7 percent to 262.25 pence ($5.18) in afternoon trade on the London Stock Exchange, reversing falls earlier in the trading session. Collins Stewart analyst Andrew Fitchie said it was clear that trading results over the next two years would be poor, but added that BA was making good progress to mitigate the fallout. “Within the context of a very difficult operating environment, BA management is doing all the right things,” Fitchie said. “It is managing fares up, cutting capacity and seeking strategic tie-ups that will provide future synergies that will allow it to inch its way back to economic returns.” Walsh warned that passenger ticket prices would have to rise across the industry as the hedging positions against high oil prices put in place by most airlines begin to unwind. “It is absolutely unavoidable that as hedging unwinds we will have to reflect the significant increase in the price of oil in our fares,” Walsh said. Asked about job losses as a result of the potential combination with Iberia, Walsh said combining the two airlines in the current economic climate would make both carriers “much stronger.” “If people are concerned about jobs, that can only be good news.” Walsh said BA had revised its capital expenditure plans to focus on cost control, but said that it had ordered six new Boeing 777-300ER aircraft for delivery beginning in 2010. The new Boeing aircraft are 23 percent more fuel efficient than the Boeing 747-400s in BA's current fleet and will give the airline additional flexibility in the long
