Stricken BA heading for £775m loss

British Airways is heading for a loss of £775m this year, which suggests the impact on the airline industry from the 11 September terrorist attacks has been even more damaging than first predicted.

BA's predicament was outlined today when the company announced its half-year results. For the six months to 30 September, pre-tax profits were £45 million, comparted to £150m during the same period last year.

Rod Eddington, BA's chief executive said he was confident the company would weather the storm: "We will survive the industry crisis. We have already taken sufficient actions to control costs and conserve cash."

BA said its net debt of around £6.5 billion was "manageable" and there were no immediate plans to sell any assets. Valued at around £1.5bn, they include property and BA's stake in Australian carrier Qantas.

Mr Eddington added that the group had cash of £1.1 billion and additional facilities of £800m.

The gloomy mood about BA's prospects was set when BA's stockbrokers, Merrill Lynch, predicted the company's losses for the whole year would be £775m, the first time the airline has failed to make a profit since it was privatised in 1987.

BA's figures undermine the main message in Tony Blair's speech to the Confederation of British Industry's conference in Birmingham yesterday. He said the effect of the terrorist attacks on world economic confidence, the airline and tourist industries was "there for all to see" but insisted Britain was better placed than any other G7 country to weather the economic storm.

He said: "Winning the battle against international terrorism is to win for the economy too. Jobs, living standards, business and trade need us to defeat this menace. Each step towards our goal is a step of reassurance for our own way of life." The Prime Minister ­ who will fly to Washington on a privately chartered BA Concorde tomorrow, the first day that the aircraft resumes commercial services after being grounded because of the catastrophic Paris crash in July last year ­ urged people to help to defeat terrorism by refusing to change their normal way of life.

He will press President George Bush to accept more European help in the war in Afghanistan to head off frustration over America's apparent indifference to international offers of military support.

The scale of the slump in demand for air travel was shown when BA revealed that last month's passenger figures had fallen by 25 per cent compared with the year before. About 500,000 fewer people flew BA in October than in October 2000. BA, which could face a humiliating ejection from the FTSE 100 index of leading UK companies, has suffered a 50 per cent drop in its share price since 11 September. The crisis in the industry was further highlighted by the disclosure that Belgium's ailing national carrier, Sabena, is expected to suspend flights from tomorrow. The Scandinavian airline SAS said it expected pre-tax profits to fall to about £10m for the nine-month period ending in September, and the Norwegian airline Braathens is to cut two of its four UK routes.

BA's worsening position will add to unions' concerns that 7,000 redundancies announced might be only the start.

Tim Lyle, of the Transport and General Workers' Union, said the industry was showing no indication of the recovery it made after its last crisis during the 1990-91 Gulf War.

Mr Lyle, whose union is the largest employees' organisation at BA, pointed out that the US government had provided United Airlines and its other struggling carriers with £16bn of aid. "We are saying the British Government should be doing something similar," Mr Lyle said. Unions want the Government to give British airlines £45m.

BA's figures will come as a severe blow to Rod Eddington, the Australian brought in last year as chief executive. He has continued to pursue the policy of his predecessor, Bob Ayling, concentrating on high-premium business customers rather than economy passengers. But that is the area worst affected by the terrorist attacks.Low-cost carriers, by contrast, have been relatively unscathed. The Irish carrier Ryanair announced a 30 per cent increase in pre-tax profits yesterday, rising to £63m.

BA said that "trading remains difficult". Booking data shows November's figures would be little better. Half-year losses, to be announced today, arelikely to be about £35m but the second half of its financial year is likely to be far worse.

The company has said it cannot afford to pay a half-year dividend to shareholders and could have to ask investors for more cash iflosses continue.