British Airways, once dubbed the world's most profitable airline, is facing a loss of up to $330 million in the current year, largely as a result of fierce price competition on glutted North Atlantic routes.
The extent of the loss, the first since the airline was privatized 12 years ago, will become clearer on Monday when BA announces its second-quarter figures.BA's main European rivals, KLM Royal Dutch Airlines, Lufthansa and Swissair have recently reported sharp declines in earnings that they blame largely on competition over the Atlantic.
Overcapacity on the Atlantic, the result of planes being switched from recession-mired Asian routes, has also hit the cargo business with yields falling well below 1998 levels.
BA has cut capacity but traffic has continued to fall, prompting analysts to double their previous estimates of full year losses to $330 million.
The rising cost of aviation fuel, which accounts for 20 percent of BA's overhead, has also eaten into the airline's operating profit.
BA Chief Executive Robert Ayling is expected to reassure investors next week that the airline is better placed than its rivals to take advantage of a recovery in the market.
J.P. Morgan, the investment bank, said BA ''is the first stock to buy for the cyclical upturn'' in the industry.
BA is concentrating on business and full fare coach traffic and avoiding the cut price market. As part of a capacity cutting program, it recently announced it was selling back 34 of its 53 Boeing 757 aircraft to the U.S. manufacturer, which will convert them into cargo planes for DHL, the air express carrier.
KLM's chief executive, Leo van Wijk, this week called on airlines to curb capacity increases on the North Atlantic to avoid a protracted period of depressed earnings.
KLM expects some capacity to switch back to Asia as the recovery gathers pace in the region.