AIRLINE ANALYSTS STUDY BRITISH AIRWAYS <BAB>
Since British Airways was sold to the
public by the British government, airline analysts have begun
covering the big carrier and giving it good reviews.
    "Analysts are picking up British Airways because it's a
major airline, and because they have fewer companies to work
with after all the mergers," said Merrill Lynch analyst Edmund
Greenslet. "Two years ago there were enough U.S. carriers, but
now more analysts are adding the international airlines."
    Merrill Lynch, for instance, will be covering it from its
international offices, he said.
    British Airways was sold to the public by the Conservative
government in February.
    It has a fleet of 167 jetliners, making it the largest in
Europe. A relatively small portion of revenue and traffic comes
from intra-U.K. operations, and its predominantly long-haul
route network spans the globe.
    Julius Maldutis at Salomon Brothers said he likes British
Airways because it can quickly redeploy jets to strong markets
or away from weak ones, as it did last year in response to the
severe downturn in North Atlantic traffic after the Chernobyl
nuclear disaster and terrorist actions.
    "Because of its diverse network, it has the ability to
hedge or mitigate adverse developments in one particular area,"
Maldutis said.
    He said British Airways should outperform the rest of the
stock market. Salomon was an underwriter for the company's
public offering in February.
    About 6.3 mln British Airways' American depositary receipts
are traded on the NYSE, and 2.8 mln ADRs on the Toronto
exchange. Each ADR equals 10 ordinary shares.
    Louis Marckesano at Janney Montgomery Scott said British
Airways near-term outlook is good. "We're looking for good
traffic growth and improved revenues," he said.
    "British Airways should be riding a good wave," he said.
"Its fiscal year began April one, so when you think of all the
troubles it experienced in the first half of last year,
especially in the North Atlantic market, you know all
camparisons should be nice."
    At March 31 the carrier had total debt of 279 mln stg for a
debt-to-equity ratio of 33 pct, which is very good for an
airline, analysts said.
    "Its balance sheet is very conservative - perhaps too
conservative for an airline - but that means it can borrow to
expand its fleet," Marckesano said.
    British Airways has been a leading force of airline
liberalization in Europe, which is being gradually implemented
to avoid the problems of U.S. airline deregulation, which
brought years of unstable fares and losses.
    Analysts agree a phased-in deregulation will greatly
benefit British Airways over the long run because it is the
largest European carrier.
    Analysts caution that British Airways faces increasing
competition for travelers to Europe from U.S. carriers as
airline consolidation here expands route networks.
    In 1983, for instance, about 69 pct of U.K.-bound
passengers transferred to European carriers after arriving at
U.S. gateway airports onboard U.S. carriers.
    But U.S. carriers are retaining more of their passengers,
and this year about 30 pct of U.K.-bound travelers are expected
to switch to a European carrier to complete the trip, according
to British Airways' chief executive officer, Colin Marshall.
    "British Airways had a greater shot at picking up traffic
when it was funneled to New York," said Marckesano "Now,
traffic is being captured earlier by U.S. carriers as it leaves
Atlanta, Dallas and other cities," said Marckesano.
    He also said that British Airways' first-half results might
mislead an investor into gauging full-year results because its
fiscal year begins April one.
    "Profits build in the first half. But if an investor just
doubles that figure, he'll be making a big mistake," he said.
 Reuter
