Air Transport World

British Airways makes major improvements despite privatization delay.

British Airways makes major improvements despite privatization delay

British Airways is having a very bumpy ride as it prepares to move from the public to the private sector (privatization, as it is called here,) but the BA management's latest thinking is that the transition could happen by the end of this year, or in the early months of 1987.

There have been successive postponements of privatization ordered by Prime Minister Margaret Thatcher's government because of uncertainty over the Laker litigation and, more recently, over the renegotiation of important parts of the Bermuda 2 air services agreement between Britain and the United States. These postponements have disappointed but not discouraged Lord King, BA chairman, and the top members of his team, Colin Marshall, CEO, and Gordon Dunlop, finance director.

The government in London worried that both these events clouded the financial future of BA to such an extent that the money markets in both London and New York would be hesitant to invest, but Marshall recently dismissed them as "short-term hiccups,' pointing out that shares of the major U.S. airlines had been at or close to an all-time high this year, and commented that Wall Street is "used to looking beyond the short-term.'

Certainly Lord King has more than fulfilled his brief from Prime Minister Thatcher, who appointed him to prepare BA for denationalization. He has accelerated a movement which was under way when he arrived to reduce staff numbers from an unwieldy 60,000 to 37,500, although the numbers have been creeping up again recently. Staff have recently been asked to consider taking unpaid leave, and to take turns at doing other people's jobs, as a way of countering the downturn in business which hit the airline in the early summer of this year. Last year BA carried 17.3 million passengers, which was 8.7% up on 1984, performed 42.1 billion RPKs (11.2% up) for a load factor of 68.6%, and 1.2 billion FTKs (up 3.4%).

Pre-tax profits for fiscal 1985-86, as announced here by Lord King this summer, were the equivalent of $274 million (converted at $1.50 to the pound sterling), up from $252 million. Debt-equity ratio has been improved to 44:56, while borrowings, all from the commercial sector, have been reduced to $568 million. …

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