Information source: http://news.ft.com/ft/gx.cgi/ftc?pag...id=IXLB0PYY8CC


British Airways said on Monday it was putting its low-cost subsidiary Go up for sale as part of a radical restructuring of its loss-making European operations.

The announcement came as Europe's largest airline reported better-than-expected second-quarter results. Pre-tax profit in the three months to September 30 jumped to £200m ($290m) from £40m a year ago.

"Thanks to everyone who works at Go, it is now a leading European brand. It has made a profit every month this year. However, given the strategic goals we have set for the group as a whole, now is the time for British Airways to gain the benefits of its investment and realise the considerable value it has created in Go," said Rod Eddington, BA chief executive.

Operating profits more than doubled to £264m, compared with £117m last time. Turnover rose just 6 per cent to £2.55bn, as margins in the second quarter doubled to 10.3 per cent.

The airline was helped by an 8.7 per cent rise in yield or revenue earned per seat flown. This was the best ever year-on-year improvement in yield in the quarter.

BA was helped by its strategy of cutting capacity - down 3.3 per cent in the first six months - against a backdrop of strong passenger demand. Business traffic grew by 7.7 per cent in the first half.

The high oil price hit profits, however, as the fuel bill rose by £61m, or 32 per cent, in the second quarter. The airline has fixed the price of 80 per cent of its fuel requirements for the year in advance, a process known as hedging.

Cost cutting kept the overall rise in unit costs, including fuel, down to less than 1 per cent.

The sale of Go is part of an ongoing radical overhaul of BA's European operations, which lost £310m at the operating level last year.

Mr Eddington promised more steps "in the coming weeks" including a shake-up of its Gatwick operation, including the anticipated transfer of many unprofitable routes to some of BA's franchise operators.

"We are taking a ruthless approach towards poorly performing routes and assets. Those not adding value are being removed. It is imperative that each of our aircraft generates shareholder value," said Mr Eddington. In early trading BA shares rose almost 9 per cent but by mid-morning they were up 8-1/4p to 338-1/4p - a rise of 2.5 per cent.