British Airways

British Airways, once the "world's favourite airline", is still Sir Richard Branson's favourite punch bag. The billionaire used the eve of Virgin Atlantic's 25th birthday to rekindle the ardour of his rebellious business youth by tilting at his traditional adversary. BA, Sir Richard suggested, could go bust. Virgin had even thought about bidding for BA but abstained because "it's not worth much any more". Partly as a result, BA's shares fell 8 per cent on Monday. All airlines face tough times – and BA no worse than many others. Over the past year, its stock price has fallen much the same as Lufthansa's and Air France-KLM's.

Meanwhile, the unlisted Virgin Atlantic group, which cut its ordinary dividend last year and made an operating cash loss before margin calls of £6m, looks pretty thinly capitalised itself. With shareholders' funds of £144m, it had £309m of cash in hand in February, equivalent to 12 per cent of sales. BA had £1.3bn, equivalent to 15 per cent. In short, BA is not going to go bust soon, even if it burnt through £200m or more this year.

Rather, BA's biggest problem remains its estimated £3bn pension deficit. Until it resolves it, BA cannot realistically turn to shareholders for long-term capital. Nor, it seems, can it close a long-mooted merger with Iberia – which, in turn, could generate the extra cash BA needs. At an actuarial review in August, pension trustees might insist that BA contribute more to close the deficit. They are unlikely to insist on contributions so high the company is in effect grounded. Peak holiday travel could provide useful extra cash. Yet BA has also asked staff to accept pay cuts, which could prompt the usual strikes. Virgin Atlantic, like all holiday companies, hopes for a hot summer; BA expects one.

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