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British Airways Says Fares Hurt Passenger Traffic; Analysts Blame Strikes

British Airways Plc said passenger traffic fell 2.6 percent last month as it raised ticket prices at the expense of volumes. Analysts said demand was probably also hurt by concern about disruption from cabin-crew strikes.

Economy-class travel fell 3.2 percent in July, outweighing a 0.8 percent increase in first- and business-class bookings, as British Airways cut discount deals in an effort to bolster fares or yields, Treasurer George Stinnes said. Traffic tumbled 14 percent on Asia-Pacific routes and 1.2 percent to the Americas.

“The lower volumes in economy come from the lower number of promotions this year,” Stinnes said today on a conference call. “What we are trying to do is balance fares against volumes. We’re seeing a little bit less volume and we’re seeing a better price. Our objective is to maximize the revenue.”

Laurie Price, an analyst at Mott MacDonald Ltd. in London, said traffic was most likely also hurt as customers chose other airlines after British Airways crew walked out on 22 days between March 20 and June 9. John Strickland, director at JLS Consulting Ltd., said the strike would “definitely” have had an impact.

“The decline represents the specter of industrial action that is hanging over BA,” Price said. “Passengers want to have certainty. Then again it’s not as bad as it might have been.”

Irish discount airline Ryanair Holdings Plc said today that its passenger total rose 13 percent in July to 7.61 million, a monthly record for the carrier. The figures are based on bookings rather than the number of people flown.

British Airways, Europe’s third-biggest carrier, fell 1.2 percent to 233.1 pence in London, where the company is based. The stock has advanced 25 percent this year. Ryanair, the region’s largest low-cost airline, rose 1.1 percent in Dublin.

‘Tinged’

“It’s very hard to quantify it exactly, but the numbers would have been tinged by the strike,” Strickland said. “Economy travelers would have been booking ahead and wouldn’t have wanted the uncertainty.”

British Airways said its fifth straight decline in monthly traffic was also attributable to a reduction in the number of people using London’s Heathrow airport for transfer flights.

The drop in Asian travel was prompted by reduction of flights to Hong Kong from three per day to two, Stinnes said. He declined to provide a breakdown for the drop in traffic to the Americas and said flights to the U.S. are “doing OK.”

The traffic drop outstripped a 1.9 percent reduction in capacity, reducing the carrier’s load factor -- a measure of seat occupancy -- by 0.6 percentage point to 84 percent.

Yield Gains

“For the summer overall, volumes are likely to be slightly lower than the peak levels seen last year, with a lower proportion of transfer traffic,” British Airways said in a statement. Yield-growth will continue before slowing this winter as carriers reverse capacity cuts imposed in the slump, it said.

British Airways’ net loss widened to 122 million pounds ($194 million) in the three months ended June 30. Earnings were hurt by the cabin-crew strikes and the grounding of flights after the eruption of an Icelandic volcano.

Talks between British Airways and the Unite union representing the carrier’s 12,000 flight attendants were adjourned on Aug. 2 without an agreement to end a 19-month dispute over terms and pay.

Unite has said the latest proposals from Willie Walsh, the carrier’s chief executive officer, might prove acceptable if he agrees to reinstate travel perks removed from striking crews.

To contact the reporters on this story: Steven Rothwell in London at srothwell@bloomberg.net

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