Midlands-based airline Bmi has insisted that it was remaining "resilient" in the teeth of the economic pressures hitting the aviation industry – even though its profits nearly halved last year.
The privately-owned carrier, which is Heathrow’s second biggest user after British Airways, reported pre-tax profits of £15.5 million for 2007, down from £29.7 million the year before.
That was despite a 12.9 per cent increase in revenues to just over £1 billion Soaring fuel costs and a £17 million hit from merging the operations of recently-acquired BA subsidiary BMED were mainly to blame for the slump in earnings.
But the founder and chairman of East Midlands Airport-based Bmi, Sir Michael Bishop, said: "Our underlying trading performance continues to be resilient against a background of difficult trading conditions throughout the aviation industry."
The company’s cash pile decreased to £136 million last year, from £156 million the year before; debt was cut from £57 million to £49 million, and the net pension deficit was reduced from £61 million to £46 million.
Sir Michael went on to warn, however, that it was unlikely that Bmi would see any improvement in the near future even though the company would go on investing.
He was speaking on a day of bad news for the industry.
Trading in shares in business airline Silverjet were suspended amid a cash crunch, and British Airways boss Willie Walsh warned that the soaring price of oil combined with a stalling economy could send some airlines out of business.
Revenues at Bmi broke through the £1 billion barrier for the first time last year but the headline figure included a £112.9 million contribution from BMED, which was bought for £30.5 million from British Airways last year.
BMED, which operated more than a dozen routes to the Mediterranean and Middle Eastern destinations including Cairo and Tehran, cost Bmi £4 million last year in integration and redundancy and £13 million in trading losses. It is now trading profitably, bmi said.
The airline gave no hint in Friday's results statement of how the remorseless rise in oil prices was affecting its finances in the current financial year.
Bmi raised its fuel surcharges in November last year as oil prices rose. Its short haul European levy went up £2 to £10 per passenger per flight, and its long haul surcharge rose from £30 to £48.
In a speech a month ago – when oil prices were hovering around the $118 a barrel mark – Sir Michael said he believed the airline’s underlying financial performance could improve this year as long as the "escalation in the price of fuel can be contained around the present level".
But crude prices have risen more than ten per cent since then, and broke through the $135 per barrel level earlier this week.
Bmi flies to several dozen destinations including Las Vegas, Sierra Leone in West Africa and Barbados.
British Airways, which has a turnover seven times greater than Bmi’s, warned last week it faced having to spend more than £1 billion extra on fuel this year if prices remained above $120.
Bmi’s passenger numbers increased by one per cent to 10.6 million during 2007, and it operated 70 aircraft, four extra than the year before.
In the past ten years bmi has gone from a wholly domestic and short haul European carrier to one where more than half its routes are mid and long haul.
Bmi is rated the most punctual airline to fly in and out of Heathrow, but the development of the country’s flagship airport "remains an issue of concern", according to Bmi chief executive Nigel Turner.
He said: "The resulting delays and disruption at the opening of Terminal 5 and the choreographed terminal moves, which will continue until the opening in 2012 of Heathrow East, have the potential to affect all Heathrow carriers." email@example.com