Apologies are easy, especially if, like British Airways, you are repeatedly in the public relations dog house. And at yesterday’s annual meeting, both Willie Walsh and his chairman Martin Broughton were quick with the guilty pleas on a range of mishaps and cock-ups — most notably Terminal 5 — in the hope, no doubt, of receiving a lighter sentence.

But yesterday’s humiliations are nothing to today’s shareholders. What they really wanted to hear was how the airline is going to make any money this year, with oil soaring to the hitherto unknown altitudes of $140 a barrel.

The answer they got was hardly reassuring. Management conceded that it would be a “considerable achievement” to break even this year. BA has outlined plans to cut 3 to 5 per cent of its capacity this winter, taking its least fuel-efficient aircraft out of service. It has already put up fuel surcharges and has raised fares for business and first-class passengers. Higher core fares are next on the agenda as the airline tries to pass on its rising costs.

However, there are fears that passengers will shun air travel if fares accelerate too quickly. June’s passenger statistics showed that traffic is falling, especially from the United States, although British sales have held up surprisingly well. But given that the UK is following the US into a downturn, BA’s prospects look set to worsen.

Of course, all airlines are hit equally by soaring fuel costs and BA is, in many ways, well placed to deal with this problem. It is better hedged than it has been in the recent past, with 75 per cent of its fuel for this year hedged at $90 a barrel and 35 per cent of next year’s.

Its debt position is also better than many of its rivals, particularly the US airlines, with gearing at only 21 per cent. Another positive is that it carries more business traffic than its rivals, which is usually less price-sensitive.

Perhaps, more significantly, the regulatory environment seems to have improved. A second “open skies” agreement between Europe and the US is in the offing and talks with American Airlines to revive the transatlantic revenue and capacity-sharing plans may have a better chance of success in these straitened times. The benefits of securing an AA/BA alliance and then another with Iberia could result in costly half-empty flights across the Atlantic being cut. That would lead to lower staffing costs and would probably allow for other cost-savings at US airports.

BA’s share price in the last downturn fell from a peak of 760p to 86p in 2003. The fall was precipitous because of the gearing effect of BA’s then hefty debt. Things are different this time. A tough climate will encourage greater discipline at BA.

Although it is still too early in the cycle to buy the shares, BA should recover faster than its rivals. However, avoid for now.

Premier Foods

Robert Schofield, the chief executive of Premier Foods, went on the attack yesterday, dismissing the “guff” written about shoppers struggling to pay for groceries and hitting out at concerns over the company’s £1.8 billion debt.

Commenting on reports that Premier could sell RF Brookes, its Marks & Spencer ready meals unit, he said: “Everyone’s saying it, apart from the people that matter — us.”

There is little doubt that this year is crunch time for Premier. Shares in the company floated at more than 200p four years ago, yet now are hovering around 75p, valuing the business at only £620 million.

Costs are rising by 7 to 8 per cent as everything from wheat to navy beans — the staple ingredient in Premier’s Branston Beans — goes up in price. To make things worse, Hovis bread has been losing market share to Warburtons.

Then there is the debt. However much Mr Schofield insists that trading is bang in line with expectations and that Premier is not at risk of breaching its covenants, analysts are concerned.

Under the terms of the covenants, net debt must be no more than 4.5 times ebidta by December 31. Analysts believe that debt will be £1.7 billion by the end of the year, while underlying earnings, including depreciation and pension credits, are expected to be about £410 million.

Until Premier allays these concerns once and for all, the shares are likely to drift. Avoid.

Young’s

Once upon a time, the pub sector was seen as something of a safe haven for investors. Customers might not have enough money to buy a new car or sofa, but it took a lot to keep a man from a pint at his local. How times have changed. The smoking ban, soaring food and utility costs, competition from dirt-cheap supermarket beer and changing social trends have long since put paid to the safe haven idea.

But that doesn’t mean that the sector should be avoided. Indeed, the sharp fall in share prices has turned many companies’ stock into bargains, among them Young’s. It has fallen almost 40 per cent over the past 12 months, yet in trading terms it continues to prove resilient, reporting like-for-like sales growth of 3.2 per cent in the past 15 weeks. With most of the industry in negative territory, that is impressive.

There is also comfort in the company’s policy of owning most of its pubs, the majority of which are in London. The net asset value of about 800p a share is 38 per cent above the current share price and its London bias, not to mention the quality of its assets, should insure it against falling property values. Thanks to the sale of its brewery shortly before the property crash, Young’s also has a strong balance sheet, with firepower of at least £150 million for acquisitions. The wider economic picture may look poor, but Young’s looks a solid bet for those with patience. Buy.

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