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Financial Analysis Of British Airways

4. Analysis
4.1 Revenue
From the graph, "Overall Revenue Trend" in appendix C we can see that during the period
2001 – 2006 revenue's have fallen by 8.2%, from £9,278m to £8,515m. Revenues fell for 3
consecutive years; at the end of 2004 revenues were £1,718m or 19% lower than in 2001.
The following years saw revenues rise £955m or 13% above this. Let us now consider these
changes in more detail. British Airways earns revenue from 3 published sources: Passenger
services, cargo services and ‘other,' being mainly fuel surcharges.
Revenues fell their sharpest during y/e 31 Mar 2002, by 10.1% or £938m. The atrocities of
the terrorist attacks in New York on September 11 hit the airline hard in the third quarter of
trading. In addition there was a general economic downturn and ‘foot and mouth' disease in
the UK. These factors led to a reduction in passenger numbers of 10.0% or 4.5m (from 44.5m
to 40.0m). Consequently passenger revenues made up 81.8% of the decrease. Decreases
were experienced across all geographical regions except for ‘Africa, the Middle East and Indian
Sub-continent.' Any falls in this area were offset by increasing traffic to the rapidly developing
economies of Indian cities. The company also was experiencing increasing pressure from the
‘no-frills' carriers. In his annual report statement the chief executive commented "Our shorthaul
business must adapt to provide a strong competitive response to the no-frills carriers …
and are now giving business travellers and holiday makers lower fares…" (Rod Eddington, May
2002)
During 2003 revenues fell again, this time by 7.8% or £652m. In his Q4 presentation to
investors, Lord Marshall noted that this was a period of "unprecedented difficulty for an already
weakened transport industry" (Lord Marshall, May 2003). In the first half of the year the
company were still feeling the shock of September 11 together with an acceleration of the
worldwide economic downturn. The threat and actual war...