Newspaper article The Evening Standard (London, England)

Beleaguered BA Rocked by Sky-High Loss

Newspaper article The Evening Standard (London, England)

Beleaguered BA Rocked by Sky-High Loss

Article excerpt

Byline: Robert Lea

BRITISH AIRWAYS has slumped to its worst first-quarter loss as it announced plans to raise more than [pounds sterling]600 million to keep the carrier afloat.

The beleaguered airline, which many expect to nosedive to its worst-ever losses this year, has been forced to disclose the extent of its decline ahead of the launch of a convertible bond in the City today.

BA admitted it racked up operating losses in April, May and June - the first quarter of its financial year - of around [pounds sterling]100 million after a crash in revenues of 12% to [pounds sterling]1.98 billion.

It is BA's first Q1 loss in the 22 years since privatisation.

Last year, when the airline made an annual loss of [pounds sterling]400 million, BA still made an operating profit of [pounds sterling]35 million in the first quarter. Two years ago it posted first-quarter profits of [pounds sterling]266 million.

News of the losses came with the issue of a five-year, [pounds sterling]300 million convertible bond, which will pay interest of around 6% and can be exchanged for BA shares at a later date. Those future shares are expected to be priced at around 180p each, around a third more than the current price of 136.6p, up 4.5p.

The airline said it has also done a deal with the trustees of its massively indeficit pension fund to free up a further [pounds sterling]330 million.

The trustees have agreed to release certain bank guarantees held by the pension funds - reckoned to be around [pounds sterling]3 billion in deficit - in the event the airline goes bankrupt and is not able to fulfil its funding commitments.

"This is not taking money out of the pension funds," said a spokesman. "These are guarantees which have been held in the event of the airline's insolvency.

"Clearly it is in everyone's interests - including the trustees - that the airline does not become insolvent and that is why the guarantees have been released. …

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