Full year pre-tax profit of £5 million

British Airways today unveiled pre-tax profits of £5 million for the 12 months ended March 31, 2000 (1999 : £225 million), ahead of average market expectations. The results included additional costs of £67 million due to higher fuel prices, £136 million due to the non-cash translation of foreign currency exposures on cost-effective aircraft financing, and £88 million of restructuring costs. They also reflected gains of £249 million on asset disposals, including £149 million from the disposal of the remaining shares in Galileo International Inc. and £58 million from the further part-disposal of the interest held in Equant.

Operating profits for the year were £84 million (1999 : £442 million).

Group turnover for the year was up 0.5 per cent, at £8,940 million. In the mainline passenger business, traffic volumes measured in revenue passenger kilometres (RPKs) fell by 0.7 per cent. Mainline capacity measured in available seat kilometres (ASKs) grew by only 0.7 per cent in-line with the group’s strategy. This resulted in a passenger load factor of 69.8 per cent, down 0.9 percentage points on a year ago.

Group operating expenditure for the 12-month period rose by 4.8 per cent to £8,856 million, resulting in a 1.8 per cent rise in unit costs. Excluding the additional costs relating to escalating fuel prices and restructuring provisions, the growth in unit costs was limited to just 0.3 per cent reflecting the group’s investment in product and customer service improvements offset by successful progress on cost initiatives. Cost efficiencies from the three-year Business Efficiency Programme comfortably exceeded the £1 billion target.

Passenger yield improved for the second quarter running reflecting the successful implementation of the new strategy, with mainline scheduled yield up by 3.3% for the three months to March 31, but the impact of significantly higher fuel prices, the continued strength of the pound, and additional restructuring costs contributed to a loss before tax of £175 million for the quarter.

The Directors recommend a final dividend of 12.8 pence per share, giving a total for the year of 17.9 pence, unchanged from last year. This reflects the continued confidence in the airline’s strategy and improving financial performance going forward.

The Group continues to implement its strategy and to improve the customer proposition it delivers to travellers. Its programme of investment in product innovation in all cabins will revolutionise 21st century air travel. The new "lounge in the sky" in Club World will be fully embodied on the New York route by July, the upgrade of the World Traveller cabin for longhaul economy passengers is almost 60 per cent complete, and the embodiment of new Club Europe is around 50 per cent complete. Improvements to the First product have also already begun. The new World Traveller Plus cabin will be available from July.

Progress also continues to be made on a number of other fronts, including the airline’s e-business plans. Recent announcements on British Airways’ participation in the first European multi-airline travel portal, and the formation of a B2B trade exchange complement the airline’s other e-commerce initiatives.

Lord Marshall, Chairman of British Airways, said: "These results mark the end of the most difficult year that British Airways has had since privatisation. Whilst airlines have reduced capacity growth plans, we still expect the excess capacity in some of our key markets to take some time to unwind. The high fuel price and the strength of sterling against the euro continue to be issues for us. The implementation of our fleet, network and product strategies together with our ongoing efforts on cost efficiency and renewed focus on staff morale give us cause for more medium-term optimism."

Rod Eddington, Chief Executive said: "Since my arrival at the beginning of May, I have been talking to staff, customers, investors and other key stakeholders in the business. I have been impressed by their enthusiasm and their determination. I believe that the basic planks of our strategy which include developing frequency, network and customer service are a good foundation for a return to profitability."

The Annual General Meeting will be held at the Barbican Centre, London on July 11, at 11am. The full report and accounts or summary financial statements will be distributed to shareholders in the week beginning June 12 and from that time copies will be available to members of the public at the company’s registered office.