British Airways relegated from Footsie

BRITISH AIRWAYS - one of only a handful of globally known and respected UK companies - will today drop out of the FTSE 100 index of the biggest blue-chip firms for the first time.

The company's fall out of the prestigious list will be confirmed after nervous and dramatic trading in the stock market on Tuesday saw Britain's flag carrier teeter on the brink of the FTSE 100 relegation zone until the last few minutes of dealing, when BA shares slipped 1/2p right at the death.

Traders said it was the tightest relegation call they could remember. ABN Amro analyst Guy Fisher said: 'It was very close this time round for BA. It's going to be a while before they make it back in.'

BA's ejection will be confirmed today on the anniversary of the 11 September attacks that had such a devastating impact on the world's aviation industry. BA's shares fell 21% to 208p a year ago, compared with last night's closing price of 135p.

BA's chief executive Rod Eddington said the company had initiated a huge cost cutting effort to help survive the current tough trading conditions. He said: 'I have never tried to hide behind 9/11. What we have been doing is reacting to how things have been changed by the no-frills airlines.'

The last-minute drop in the share price left BA as the 111th biggest company in the London stock market, valued at £1.461bn, just £4m below the 110th ranked company, the technology group Arm Holdings. Under the FTSE 100 rules, any company ranked below 110 at the time of the quarterly shake-up is automatically thrown out of the index of top companies. The relegation will be officially confirmed later today. Two other companies, music giant EMI and electricity generator International Power, are also certain to be kicked out.

Although BA insiders put a brave face on the loss of FTSE 100 status, there will be immense disappointment that the company is no longer listed with the top blue-chips.

One senior executive said: 'Of all the days for them to recalculate the FTSE, it could not have been a worse one for an airline. Of course we would rather be in the FTSE than not, but we'll be back,'

British Airways has been a member of the FTSE 100 since the company was privatised in 1987 but its market value has been sliding rapidly since it peaked at almost £8bn in 1997, the year to which many of the causes of its decline can be traced.

During that traumatic year, the then chief executive Robert Ayling picked a fight with the previously placid ground staff and cabin crew, stirring a hornets' nest of industrial unrest at a company renowned for its improved labour relations. Worse still, those traditional red, white and blue tail-fins so beloved of BA's core business customers started to be air-brushed out, replaced by the swirly 'Cool Britannia' images which led Lady Thatcher to cover a model BA plane with a hankie at that year's Tory party conference.

Most importantly, however, it was around that time that a new generation of maverick UK based airlines led by Ryanair and Easyjet began their assault on BA's backyard. After only five years, the pair of aviation gadflies now rival the flag-carrier in size. In fact Ryanair's City valuation is considerably more than BA's, while easyJet is catching up fast. It may not like it, but BA may soon be only Britain's third biggest airline.

Meanwhile, its claim to be the world's 'favourite' has been quietly dropped. The statistical basis for the boast, the fact that it carried more international passengers than any other, was undermined when Lufthansa roared past. Air France is not far behind.

Ryanair has written to the London Stock Exchange seeking admission to the Footsie. It said there should be at least one representative of the airline industry in the index to replace British Airways.