British Airways will not reach a key profitability goal this year due to high fuel prices and has ruled out forced job cuts as it prepares to consolidate its London operations in a new airport terminal, its new boss said.
Chief Executive Willie Walsh also said the airline planned to invest 100 million pounds ($175.7 million) on new business-class seats and in-flight entertainment amid pressure to improve customer service and increase long-haul traffic.
Walsh, who over the weekend replaced outgoing chief Rod Eddington to head Europe's third-largest airline, said on Tuesday BA would not this year achieve Eddington's 10 percent operating margin target.
"I do believe it is achievable. With fuel prices where they are, we clearly are flying into very significant headwinds ... I don't have a date in mind when we will achieve it," Walsh told reporters on a conference call.
The airline reported an 8.5 percent operating margin in the first quarter to end-June, but fuel costs have soared since then.
Walsh, former boss of Irish national carrier Aer Lingus, also ruled out forced redundancies even though the airline has set a target to reduce labour costs by 300 million pounds by end-March 2007.
He declined to confirm reports that BA hoped to cut staff numbers in some areas by 15 percent when it consolidates operations and adopts new technology as part of a move to a new terminal at Heathrow Airport in 2008.
JOB LOSSES The airline currently operates from two terminals at Heathrow. Analysts expect the move will result in thousands of job losses.
Labour relations will be a priority for Walsh - known for axing one-third of Aer Lingus's workforce - following three summers of industrial strife at BA's London operations and ahead of negotiations to change working practices at Heathrow.
"We expect to have all of our processes, work practices, agreed and ready to implement by the end of 2006," Walsh said, commenting on preparations for the terminal move.
Walsh said most staff were "very angry" about a walkout by some BA workers that grounded flights last month. "We cannot put up with that sort of activity going forward."
Despite an industrial dispute at its caterer Gate Gourmet, which spilled over into last month's sympathy strike, Walsh said there were no plans to cut catering from any BA services.
He said customer service was a priority. BA planned to invest more than 100 million pounds on new business-class seats, in-flight entertainment and the airline's Web site. An announcement is due in the next few months.
Walsh also said there would be changes to the airline's regional short-haul business.
He signalled there were no plans to lift its stake in Spain's Iberia or merge with a US airline, saying consolidation was not an immediate priority until there were regulatory changes.
He said American Airlines remained an "excellent partner".
Walsh reiterated there were no immediate plans to buy new aircraft but that the carrier was evaluating a range of models including the Boeing 787, 777 and the proposed 747 Advanced, as well as the Airbus A350 and A380.
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