BA tightens belts after huge loss raises pressure

10 August 2008
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11 August 2008 | Helen Gilbert

British Airways (BA) plans to save £50 million by next March in a bid to combat the effects of fuel price hikes and the economic slowdown.

It follows an announcement by the airline last week, which revealed pre-tax profits of £37m in the three months to the end of June compared to £298m over the same period a year earlier.

Under the ambitious plan, BA will implement a four- point programme. This will include price renegotiations with existing suppliers and a clampdown on maverick spend linked to driving buyers towards preferred suppliers.

Tim Richardson, BA's general manager of procurement strategy and operations, told SM the airline would also work with finance colleagues within the business to change specifications and added a lean supplier review would also be carried out.

"This means we are going to be targeting a small number of key suppliers and asking them how we can work jointly together to take cost out of the supply chain," he said.

According to Richardson, the airline spent £1bn a year on fuel in 2004 - an annual cost that has now risen to £3bn. He added: "Our costs have gone up massively. It's a huge impact on our cost base at the same time as the economy is slowing.

"We are looking to do this before the end of March 2009 - either to have made the savings or identified what we will have to do by then."

Meanwhile, the Office of Fair Trading has confirmed three ex-employees and one current employee of BA have been charged with involvement in fixing the prices of fuel surcharges. They are Alan Burnett, former head of UK&I sales, Iain Burns, former head of corporate communications, Martin George, former commercial director and Andrew Crawley, head of sales.

They are charged with having "dishonestly agreed with others to make or implement arrangements which directly or indirectly fixed the price for the supply in the United Kingdom of passenger air transport services by British Airways and Virgin Atlantic Airways."

They will appear at City of London Magistrates Court on 24 September.



SMaug2008

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