BA posts 8.6% fall in premium traffic

London: British Airways (BA) says market conditions remain challenging and its full year revenue forecasts are at risk as it revealed that traffic fell 4.8 per cent in Sep-tember as sales of premium tickets declined.

BA said first and business-class travel tumbled 8.6 per cent last month as the credit crisis and econ-omic slowdown led to job losses and tighter budgets in the City of London and Wall Street.

Premium traffic had risen 2.2 per cent in August.

BA said the fall in traffic led to a 4.3 percentage point fall in its load factor to 74 per cent compared with the same month a year ago. Load factor is a key measure of how full its planes are.

The carrier said in a statement on Friday that "longhaul premium traffic has softened after the summer and forward bookings are being affected by the increased anxiety in financial markets and by the uncertain economic outlook".

Risk

It added that "revenue forecasts for the year carry some risk, although current good yields and the stronger dollar are broadly offsetting the volume impact".

"It does look pretty bad," said Jonathan Wober, an analyst at Societe Generale in London. "If they continue to have traffic figures like this, their revenue forecast must be under threat."

Wober has a "sell" recommendation on the stock.

BA's CEO Willie Walsh said on September 24 that the airline was bracing for a slump in travel in the lucrative North Atlantic business market as the global financial meltdown deepened.

Financial institutions account for 13 of the top 50 business clients at Europe's third-largest airline, which forecasts that revenue will gain three per cent this year.

British Airways shares declined 7.1 per cent to 165.40 pence in London, taking declines this year to 47 per cent and valuing the company at £1.9 billion ($3.35 billion).

Premium traffic at the airline had previously held up better than coach-class travel even amid signs of slowing growth.

Economy traffic declined 4.1 per cent in September, the company said yesterday, less than half the rate of the premium decline. Ryanair Holdings, Europe's biggest discount airline, said yesterday that it attracted 20 per cent more passengers after adding routes.

"Trading conditions continue to be challenging," British Airways said."

Traffic to the Middle East also fell 12 per cent in September due to Ram-adan, company Treasurer George Stinnes told reporters on a conference call. Last year, Ramadan fell between September and October.

Favourable yields

While revenue forecasts for 2008 "carry some risk", yields, or average prices, are good, the company said, while the strengthening of the dollar compared with the pound is offsetting the decline in passenger numbers. British Airways still aims to break even for the year at operating level.

"Any person that makes a forecast from next year is a very brave person," Stinnes said. "Market conditions are tough, there's no question about that."