British Airways Investors Facing a Bumpy Landing ; Market Report

Evening Standard - London › July 27, 2005

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Summary

SHAREHOLDERS at British Airways, down 31/4p at 2711/4p, were being urged to fasten their seat belts today and brace themselves for turbulence over the next few years as the national flag carrier struggles to hold down costs and tackle increased competition.

That is the story emerging from US broker Morgan Stanley (MS) which has downgraded the shares from equal weight to under weight while slashing its 12-month target price from 300p to 255p. In three years' time British Airways is due to merge is entire Heathrow airport operation, currently covering three terminals, into the new Terminal 5 (T5) project. The move is expected to generate "significant" cost savings and mark an unprecedented shift in the way the group operates. But MS warns that BA will need every penny generated by those cost savings at T5 to fend off the impact of rising fuel charges and other ongoing expenses.

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British Airways Investors Facing a Bumpy Landing ; Market Report

In the short term, the broker expects the group's strengthening premium traffic to underpin its results, and says client...

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