Friday, 21 May 2010
BA losses in a spin
In short, BA posted its worst ever losses today on the back of all the troubles last year, a £531million pound loss. A very rough calculation is putting this at over £10,000 loss per flight taking off!
The City is focusing on the fact that the company led it to believe it would lose £600 million. Therefore this number is a beat for them and the shares are marked up!
However, all these figures are pre the next set of strikes which could cost £150 million and the cost of the Ash cloud - which of course could well be a recurring theme.
Not only this but BA's pension deficit is still a disaster zone, with the deficit being worth triple the company's value and the planned merger with Iberia will stick BA with another loss making airline - it may not even be a UK domiciled company for much longer.
BA is said to have £1.7 billion of cash on the balance sheet. Therefore the company can stand these conditions a while longer. What the analysts are missing is that BA is not replacing its fleet. Look at how old its planes are here: compare it to say Virgin or Easyjet. These aircraft that need replacing cost $70 - $200 million each. OK BA gets 50% discount, but it is still over £2 billion of replacement costs needed very shortly.
I have always said BA have good management, despite the sniping in the press, Willie Walsh, Keith Williams both do a terrific job, but it is a Sisyphean task.. But the Unions and weather are conspiring to ruin the brand once and for all. Perhaps with the merger they will try a re-brand?
All this and the share at at 190p - in current parlance - get real.