High Oil Squeezing British Airways Margins

LONDON –

Oil prices are showing no signs of cooling, and airlines are not finding the struggle any easier– British Airways has warned that it will miss operating margin targets for 2009, as higher costs eat into its bottom line.

“Fuel will become our single largest cost next year,” Finance Director Keith Williams told reporters ahead of an investor day on Thursday. The company announced it would miss its operating margin forecasts of 10%, for 2009, with the likely figure coming in at around 7% instead.


Shares in British Airways slumped 4.3%, or 11.50 pence (23 cents), to 253.50 pence ($5.05), in London on Thursday morning. Rival Air France-KLM fell 3.3%, to 16.98 euros ($26.02), in Paris, and low-cost airline Easyjet slipped 1.0%, to 421.50 pence ($8.41).

“I think the surprise was the target operating margin of 7%,” said Uwe Weinreich, analyst with HVB Corporates and Markets. He said there were several reasons for this target cut, including higher sales costs, but said the most important thing was the higher fuel bill for airlines.

Forbes