Concern as USAir delays results

USAir, the struggling American airline in which British Airways owns 24.6 per cent, yesterday delayed its annual results, heightening concern about the company's restructuring plans.

The figures, which were due today, are expected to show massive losses, but analysts were hoping for some positive news about USAir's negotiations with its workers, designed to reshape the company.

BA's $400m (£258m) investment in USAir two years ago was part of a plan to take strategic alliances in airlines in order to become the first global player.

USAir's figures, now scheduled for publication next Friday, are expected to reveal losses of up to $600m (£380m) and will cause further unease among investors about the wisdom of BA's global strategy. Concern about USAir saw BA's shares edge down 4p to 371p yesterday.

The American airline, which has not made a forecast, said such figures were "purely speculative". USAir is in protracted talks with the powerful US pilots' union about accepting job losses and a 20 per cent pay cut in return for shares, in order to reduce costs by about $1bn.

This would dilute BA's stake, but the company says it would not adversely affect the annual £70m in revenue it receives due to the extra passenger traffic from cross-ticketing.

USAir said yesterday that the delay was purely technical and had nothing to do with current restructuring negotiations. "We do not necessarily have any plans to tie the news of our results with a statement about the talks," a spokesman said.

One New York analyst said the delay was not a cause for concern, but he worried that USAir could give no indication of when - or whether - the restructuring talks would succeed. "If USAir starts retrenching, that would be a problem for BA. It needs to tap into USAir's domestic routes and if some of those go then BA's share of the world's biggest airline market takes a hit," the analyst said.

BA points out that if USAir does cut routes, they are unlikely to be the important and profitable services that bring in revenue for the company.

American analysts remain extremely cautious about USAir's problems. In London, however, Ian Wild, of BZW, was more optimistic. "USAir is not looking into the precipice. It had enough cash to survive the November/December period, and can now look forward to the better trading," he said.

BA has hinted that it could write off its USAir stake without too much financial pain, but the damage to its strategy of forming alliances around the world could be more serious. The US accounts for 40 per cent of the airline passenger market, and BA hasto be involved in America if it wants to be a global airline.

However, there are question marks over its strategy. Of its minority stakes, only a 25 per cent holding in Australia's Qantas makes money. A 49 per cent interest in Deutsche BA and 49.9 per cent in the French TAT have failed to bear fruit.

BA yesterday declined to comment on USAir's profits, but said it was committed to a global strategy. The company said it was still actively seeking a partner in the Pacific rim region, served by such airlines as Cathay Pacific, to complete its network.

However, many sceptics feel the strategy is fundamentally flawed and BA could better use its money and management time on expanding the core business.