Shareholders in British Airways will arrive at the annual meeting on Tuesday with heavy hearts. The company is clouded in troubles. It racked up a record loss in the 2008-09 financial year, and is on course for an even greater deficit this year as business-class traffic evaporates. It is also on a collision course with cabin crew and ground-service unions, with industrial action likely next month.

Over all this looms the spectre of a pension deficit which, according to gloomy estimates, could reach £3 billion by the end of the year, dwarfing BA’s £1.4 billion stock market value.

In the middle of this storm is Willie Walsh, the chief executive. His frank appraisal of the airline’s future — “a fight for survival” — jars with staff and some shareholders. The latter understand the need to cut costs by forcing down the wages and conditions enjoyed by the airline’s workers, but they worry that Walsh’s public pronouncements about BA’s fate will have the unintended consequence of frightening off the paying public.

There is also a worry about him crying wolf. If he says that this is a fight for survival, what will he say if things turn really nasty next year?

While it is impossible to rule out the possibility of BA losing its fight for survival — after all, no-one thought it possible that General Motors could ever go under — it is also possible to take a contrary view and say that its prospects are not too bad.

Three of the City’s top airline analysts — Andrew Lobbenberg at Royal Bank of Scotland, Andrew Light at Citigroup, and Douglas McNeill at Astaire Securities — all rate BA a buy, with Lobbenberg and Light having target prices of 225p and 260p respectively. The shares closed last week at 120p.

All three see BA as a recovery play. As Light says, using a nice piece of analyst jargon, it is an “early cyclical with a high beta” — so, if the economy takes off, the shares should rocket. The view is based on past experience and BA’s unique exposure to the rich business traffic flow across the North Atlantic. If the general economy recovers, and in particular the financial services sector, BA should start making money again.

Shareholders will be truly grateful to Walsh if he can do two things. One, cut costs without provoking strikes that could wreck the company. Two, close off the pension problem once and for all. If he can do so, they will be more than happy to support a large and deeply discounted rights issue to bolster the company’s balance sheet.

No time for amateurs

PROPERTY is a cyclical game. No great insight there, but it is important to be reminded of the fact when a handful of the sector’s veterans raise cash to buy distressed assets.

Their shared belief is that while the last cycle may not have reached the bottom, we are certainly close to that point. What makes it even more attractive for them is that a number of the sector’s biggest companies are still repairing their balance sheets and are in no position to take advantage of opportunities that may present themselves.

Last Friday, London & Stamford, run by Raymond Mould and Patrick Vaughan, raised £225m. Over the past 30 years the duo have been astute readers of the market, first with Arlington Securities, which they sold to British Aerospace, then Pillar, later sold to British Land. Now they want to do it again with L&S.

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