BA chief executive Willie Walsh said it is an impact of company’s capacity reduction and cost cuts and according to him it shows the impact of permanent changes across company policy. He also said the British Airways has adapted to the global recession. He further explained the reasons behind the 10.5 percent decrease in their operating costs are external spending cuts and capacity reductions.

On the other hand rival Air France has reported stabilized business, but according to experts its 2010 estimates are quite high. Finnair, the Finnish national carrier, has gone through loss in the last fourth quarter and announced that it is expecting future losses in this quarter also.

For BA the revenues fell down to 12.9% of GBP£6.14 billion. It has faced an operating loss of GBP£86 million for the first time during last year.

According to the International Air Transport Association (IATA) this sector will face many challenges this year including new security issues.

BA reported lower cabin class sales and surcharges which in turn caused 8.8% fall in the third quarter. The airline also reported a decrease in its business class passengers by 2.1 percent and a total of 7% decrease in the month of January. BA has announced its merger agreement with Spain’s Iberia airline.

Whereas other low-cost competitors like Ryanair and easyJet have reported profits in their forecasts and said they are still able to make their market share from BA and Air France-KLM.

Such merger led to a negative reaction of Virgin Atlantic noting that it would give a possibility for British Airways and Iberia to augment BA’s prevalence at Heathrow with 44% of take-off and landing slots this winter.

Last year British Airways and Iberia transported 62 million passengers, moreover, if combine their revenues then the figure will be about €15 billion.

The airlines consider the joint cooperation will help to get about €400 million that will be beneficial for companies’ shareholders, customers and even employees. Due to such merger a potent European airline will be created that will be able to rival with other airline companies.

According to Willie Walsh, BA chief executive, both airline companies would keep their own brands, nevertheless they will cooperate as a combined force.

It was estimated that about one third of savings will be received from joint selling, network and revenue management benefits. The companies chose the group CEO Walsh and a management team that will control the combined business.

First of all the aim of the group is to unite the two airlines that have the leading position in the UK and Spain and heighten their presence in the international long haul markets and at the same time to keep their own brands and current operations of each airline.

BA will have a possibility to receive up to 59 routes among which 13 will be in Latin America. As for Iberia, it will have up to 98 new destinations across the UK airline’s network

The companies will also provide better scheduling and connections, reasonable prices, more VIP lounges and improve flyer benefits.

Since the summer of 2008, 2,500 jobs have gone and more are likely to follow, according to Willie Walsh, BA’s chief executive. Apart from this, management is also offering their employees the chance to work part-time or to take unpaid leaves.

“BA should see some benefit from lower fuel costs in 2010 but unfortunately the global recession has hit BA hard,” said Tony Shephard, an analyst at Charles Stanley. He added that a “17.7pc decline in premium traffic in April does not bode well for the start of the new financial year.”

As we’re writing this piece of news, Unite, a representation for 14,000 of BA’s cabin crew, are planning a strike in order to prevent the company from changing their salaries and working conditions. The airline announced at the beginning of last month that they’re planning some changes for their staff, including 1,000 voluntary redundancies.

British Airways has also been negotiating a partnership with American Airlines and the Spanish carrier Iberia, which could mean a stronger grasp for the tree on routes across the Atlantic.

According to Giovanni Bisignani, IATA chief executive, $80bn will vanish from the industry’s top line and it will take years in order to retrieve 15 per cent of lost revenue.

Airline companies try to merge but as a matter of fact they are confronted with normative barriers. For that reason the have decided to coordinate schedules and ticket prices on busy routes that can help them strengthen their businesses

One should say that during 30 years the airline industry has been unsteady. This fact can be explained by the following reason – the price of an airline seat has dropped estimably. In order airline companies do not file for bankruptcy, the new alliances were built up.

Two alliances such as Star and SkyTeam received antitrust immunity by the US Department of Transportation. At the end of this week the third alliance known as OneWorld will be given a preliminary ruling on its application for immunity.

It became known that the Star Alliance has 41 per cent of the market when at the same time SkyTeam has 29 per cent and OneWorld has 20 per cent.

Willie Walsh, BA chief executive, was sure that the alliance OneWorld would receive the permission despite the fact that it had 2 attempts to forge an alliance that was in 1996 and 2001 but were discarded as according to regulators the companies had to give up a big numbers of slots in order the carries could prosper.

The only way for BA, AA and Iberia to prove to Brussels that they have the financial benefits is that the planned alliance OneWorld will not depend on the expense of consumers.

It is decided that a new short- and medium-haul airline will operate as an independent network carrier which will have a service like IB has that will be able to feed the profitable long-haul network through its Madrid hub.

According to a spokesperson of ATWOnline, despite the fact that Iberia was considered to be the leader of the Europe-to-Latin America routes, still it had a structural problem in its domestic and European operations. For that reason it was decided to settle a new model that would lower operation costs and there would be no ‘legacy’ work practices due to which it would be possible for Iberia to rival with other carriers.

In spite of the fact that there are opponents of this new model, one should say that it will help to secure jobs. Another thing that happened to Iberia Airline Company was a two day strike that led to the cancellation of 404 flights. The strike was held in order to support salary demands.

Initiators of the strike were 4,300 staff from labor unions that wanted to stop a four-year pay freeze. It is also expected that stoppages will be on November 10 and 11. Such situation can lead to the fact that Iberia will have to compensate losses or buy tickets on other days to its passengers.