British Airways’ revenues positive

British Airways has presented its preliminary results for the 12 months ending 31 March, 2008.

• Revenue was up 3.1 per cent to £8,753 million

• Operating profit of £875 million (2007: £602 million)

• Operating margin 10.0 per cent (2007: 7.1 per cent)

• Profit before tax of £883 million (2007: £611 million)

• Full year fuel costs top £2 billion

• Two million passengers through T5 since opening

• NAPS pension deficit tackled

• First dividend since 2001

• Staffshare in £35 million bonus

‘This is an outstanding financial result for the company despite rising fuel prices and significant economic slowdown in the last six months. We have achieved our goal of a ten per cent operating margin which I am delighted has triggered the reward scheme for our staff. For our shareholders too, it signals the welcome return of a dividend – the first since 2001,’ said British Airways’ chief executive Willie Walsh.

‘Delivering 10 per cent has not been easy, but we have achieved it by remaining focused on our strategy for the last six years. We tackled our pension deficit and we have strengthened the fundamentals of our balance sheet while at the same time growing a profitable business.

‘Our profits are up some 45 per cent and operating costs are down 0.7 per cent. Excluding fuel, operating costs are down 3.0 per cent. Fuel prices have hit record highs and continue to climb, driving some airlines into bankruptcy and putting pressure on others,’ he said.

‘Despite the difficulties of the opening of Terminal 5 in the first few days, it is now working well and some 2 million passengers have gone through it and many have enjoyed the experience. Phase 2 of the move of our long haul services into the terminal begins on June 5 and will include our blue riband New York services and flights to seven other destinations.’

Group revenue in Quarter 4 was up 10.3 per cent to £2.1 billion on operating costs up 2.2 per cent leaving a record operating profit of £141 million and operating margin of 6.6 per cent. This was despite fuel costs being up almost 20 per cent. Quarter 4 profit before tax was £95 million.

Passenger revenue rose 3.8 per cent to £7.5 billion, on capacity up 0.8 per cent. Seat factor was down 0.5 points to 75.6 per cent. Yields, however, rose 3.6 per cent due to an improved mix of premium traffic and the effect of fuel surcharge increases.

Club World performed strongly and despite a weak performance on Club Europe, overall traffic in premium cabins increased by 4.4 per cent.

Long haul non-premium traffic has been weak since August.

Cargo volumes, measured in CTKs, rose 4.2 per cent following a strong recovery in the second half, underpinned by record levels of operational punctuality. Revenue rose 3.0 per cent to £616 million. Excluding exchange, cargo revenue was up 4.8 per cent.

Total operating costs were down 0.7 per cent to £7.9 billion with unit costs also down 0.5 per cent.

Employee costs fell by 4.9 per cent to almost £2.2 billion due to reduced pension and severance costs. Although manpower at Heathrow increased, total manpower reduced. The fuel bill for the year was up £124 million despite significant hedging and a weaker US dollar.

The financial position of the company is strong; cash balance at the end of March 2008 was over £1.8 billion, down £491 million on the previous year. This reduction was primarily due to one-off payments into the New Airways Pension Scheme totaling £610 million and to the US Department of Justice for anti-competitive activity. Net debt was £1.3 billion, up £319 million on March 2007.

Capital expenditure at £734 million was higher than last year following the delivery of four new Airbus A321 aircraft, three Airbus A320 aircraft, and continued investment in the new Club World cabin, Terminal 5 and increased shareholding in Iberia.

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