Profit forecast, trimmer flights push up British Airways' stocks

By Steve Rothwell  |   2008-11-8  |     NEWSPAPER EDITION

BRITISH Airways Plc, Europe's third-largest carrier, gained the most in at least 20 years after raising its revenue forecast and pledging to trim flights, boost fares and complete a job-cutting program.

The airline is fighting a global economic slowdown by hiking prices to compensate for declining capacity, in contrast with low-cost carriers that are slashing fares to fill seats. London-based British Airways raised its forecast for full-year revenue growth to 4 percent from 3 percent, promising to scale back capital spending and eliminate hundreds of jobs.

"BA's strategy has been to raise fares to offset cost inflation," Andrew Fitchie, a London-based Collins Stewart analyst, wrote in a note to investors. The plan "appears to be working as it manages yields up to a level that is sustainable against higher long-term oil prices."

The airline will reduce the summer schedule by 1 percent as the industry suffers from fuel prices that hit a record in July. The International Air Transport Association forecasts that industry losses will exceed US$5.2 billion this year.

British Airways advanced as much as 28.6 pence, or 22 percent, to 159.10 pence in London trading, the biggest jump since at least September 12, 1988, and was up 11 percent as of 10:15 am. The shares have dropped 53 percent this year, valuing the airline at 1.68 billion pounds (US$2.64 billion).

The carrier made changes as the company said fiscal first- half sales rose 6.4 percent to 4.75 billion pounds, beating the average analyst estimate of 4.57 billion pounds. Operating profit also surpassed estimates even as the carrier reported a net loss of 49 million pounds, compared with net income of 493 million pounds a year earlier.