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Search forBA pays a dividend as profits soar by 45%
16:21 - 16-May-2008
The huge profits, which spark a £35m bonus bonanza for staff, were tempered by a warning that current trading is 'particularly difficult' in the teeth of rising fuel prices which are double where they were a year ago. The airline also warned of potentially large cutbacks to its network. Chief executive Willie Walsh, who has had a torrid time since BA sleepwalked into the disaster of the botched Terminal 5 opening, was triumphant over the 45% leap in profits in the year to 31 March.
'This is an outstanding financial result for the company despite rising fuel prices and significant economic slowdown in the last six months,' he said.
"We have achieved our goal of a 10% 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.
'Delivering 10% [profit margins] 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.
'We operate in a volatile market and this year has been no different against the background of a progressively tougher trading environment.'
BA today warned that profit levels in the first quarter are under immense pressure. Some analysts reckon the flag carrier is doing no better than breaking even in current trading.
The airline today guided analysts downward on how fast revenues will grow this year, saying the figure is likely to be around 4% rather than the 4.5% it was previously signalling.
It said its recent increases in fuel surcharges, now way over £100 return for the longest trips, had offset the fall in the number of passengers flying longhaul and the impact of the delayed move into Terminal 5.
On top of £200m of extra costs including the delays at Terminal 5, the airline warned of the effect of the oil price. In March, BA said it expected its kerosene bill would rise by £450m to £2.5bn in the current financial year.
Today the airline said if fuel prices continue at the current levels of $120 a barrel the bill will exceed £3bn. Every time the price of oil goes up by $1 a barrel, said BA, that takes another £16m off its bottom line.
'The full year will be challenging,' the airline said in a statement. 'As a result we have reduced capital expenditure and are reviewing our capacity, costs and network in the context of the economic pressures and high fuel prices.'
The dividend will be 5p for the year.
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The motorist feels somewhat battered from all sides, seeing the oil companies going off with cash in their pockets and the Treasury filling its coffers
