BA profits dive as it turns to suppliers to cut costs

British Airwayshas reported the biggest loss in its history since becoming a private company in 1987, citing soaring fuel costs, a weak pound and poor demand in recent months.

The company reported a loss before tax of £401 million for the year to 31 March, after seeing its results hit by a weak pound and higher expenditure per gallon of fuel.

Willie Walsh, chief executive, indicated that BA would put pressure on its suppliers to reduce costs.

"The prolonged nature of the global downturn makes this the harshest trading environment we have ever faced,” Walsh told investors.

He said there was “no immediate improvement visible” and the company's executives offered no guidance for the current year due to difficulty forecasting sales.

The airline has announced plans to mitigate against further losses. BA has already cut more than 2,500 jobs since last summer, and announced redundancy-related costs of £78 million.

Today, the company announced a company-wide pay freeze, the offer of unpaid leave or part-time working to staff, and putting a stop to management bonuses. It is also in talks with unions about "pay and productivity changes".

The company will also reduced external spend by slashing its use of contractors by 15 to 20 percent and stopping the use of consultants. It has also started talks with suppliers to cut costs.

Earlier this month BA's global chief information officer Paul Coby detailed the criticality of keeping a tight rein on suppliers.

In an interview with sister publication, Coby said it was critical to recognise "that you have different sorts of suppliers, like Amadeus for reservations, and SITA for our networks. Along with BAA, they are the most mission-critical for us and we need very particular relationships with those organisations."

"If you outsource functions that's still your accountability as a CIO and as a brand. Customers don't care and nor should they if someone is directly employed by BA, SITA or Amadeus."

Copyright © 2009 IDG Communications, Inc.

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