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 in the middle east and the SARS epidemic in the far-east saw passenger numbers fall a further 2.0m or 5%. Passenger revenues made up a high proportion of the decrease (75.3%). Cargo revenues remained fairly static; Fuel Surcharges and other revenues fell by 20.2% largely due to a dilution in the shareholding in Australian carrier Qantas with who British Airways have a joint services agreement.
Decreases were experienced in all geographical sectors. Looking at the graph "indexed revenue changes by geography" in Appendix C we can see that see that the geographical sectors are starting to show differing trends. Decreases were sharpest within the domestic routes with a decrease of 11.4%. This was attributable to a new short-haul low fares initiative that was launched in response to the no-frills' carriers, beginning with the Domestic market. Revenues fell again in 2004, but at a much slower rate than the previous two periods; a 1.7% or £128m reduction compared to the previous year. Passenger numbers weakened again by a similar amount to the previous year (2.0m). Because revenue falls were much less this year, it indicates that the amount of revenue contributed per passenger increased. This is supported by a statement in the annual report for the period, "intercontinental premium travel [business 9
and first class] volumes are recovering" These cabin classes produce much higher revenues for the company.
Passenger revenues again made up the highest proportion of the decrease (66.4%). The UK sector saw a recovery of 2.7% or £100m, but the remaining 4 sectors all experienced decreases, most notably The Americas (-9.1%) and Europe (-4.9%). The fall in Europe is largely due to the realisation of the reduced short-haul fares being rolled out across European destinations this year.
The first rise in Revenues was experienced in 2005; an increase of 3.3% or £253m. Passenger numbers dipped again by 386,000. Passenger revenues remained relatively steady, only accounting for 9.5%, or £24m of the...
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