The BA chairman told an emotionally charged annual shareholders' meeting in London that Sir Colin Marshall, his second-in- command, was taking complete charge of executive management with immediate effect.
Lord King, 74, will continue as non-executive chairman until next year's annual meeting, when he will hand over the chairmanship to Sir Colin and assume the honorary title of life president.
Speaking after the meeting at the Barbican centre, Sir Colin, who is currently deputy chairman and chief executive, pledged that there would be 'no change in direction' at BA.
His appointment to the top job had been widely trailed in recent days but there was some surprise that he would have to wait for a further year before taking on the chairman's title. The City was unmoved by the announcement, marking BA shares down 1p to a closing 278p.
Announcing his decision to stand down after 11 turbulent years, during which time BA was privatised and took over British Caledonian, its principal UK rival, Lord King paid tribute to Sir Colin. 'What success I have achieved has been in partnership with him. Sir Colin is admirably equipped to be chairman. I expect him to lead it to a prosperous and successful future.'
Sir Colin, 59, refused to be drawn on how BA would develop under his stewardship. However, it is certain to pursue further global link-ups. The airline is in advanced negotiations to take a stake in the American carrier USAir, and Sir Colin added: 'We are going to look for opportunities in other areas of the world, including Europe.'
The hand-over to Sir Colin comes when BA is recovering strongly from the effects of the Gulf war and the ravages of recession on both sides of the Atlantic. Last year, BA made pre-tax profits of pounds 285m against a backdrop of heavy losses among many other flag-carrying airlines. It now carries 25 per cent more passengers than five years ago.
Lord King warned, however, that the need for cost-cutting remained. This year BA is planning to reduce its costs by a further pounds 150m - suggesting a further round of job losses.
He also disclosed that BA had been given authority by the Government to take action itself to disenfranchise foreign shareholders if it was feared that the level of overseas ownership might endanger BA's status as a British carrier.
Sir Colin refused to elaborate on the stage reached in the talks with USAir. A stumbling block could be the 25 per cent limit on voting shares the US government imposed on foreign investors, but that might be offset by 'other factors and features that can be negotiated as part of an agreement'.
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