British Airways has ruled out a rights issue, but is talking to institutional investors about a convertible bond to raise the cash to survive the "biggest crisis ever" in the industry.
The airline's chairman, Martin Broughton, dubbed the last 12 months an "annus horribilis" at yesterday's annual meeting. The struggling flag carrier's directors faced placard-waving demonstrators outside the venue calling for the resignation of its chief executive, Willie Walsh, over cost-cutting plans that could see 3,700 jobs lost.
Mr Broughton told investors and employees: "This is the biggest crisis the aviation industry has ever known – and it continues."
There was little good news. The market for first- and business-class travel may never recover, leaving the company facing a "fundamental challenge" to its business model, Mr Broughton said. And its pension deficit may have ballooned by more than £1bn in the last year alone. "The deficits remain huge and, in the current climate, the company will not be able to afford to increase its own contribution," he said.
Against such a background, BA wants to shore up its balance sheet. Until agreement is reached over the convertible bond, neither the scale of the proposal nor the plans for spending the money raised will be clarified. But Mr Walsh quashed market rumours of an imminent rights issue, and described recent reports citing a £500m figure as "nonsense". "Discussions about the convertible bond are on-going, but we are not looking at a rights issue," he said. "We see liquidity as very important in the current environment and that's why we are focused on cash and cost reduction, and the reason we've re-modelled our capital expenditure."
Cost-cutting negotiations with trade unions representing cabin crews, check-in attendants and ground handling staff were the main point of controversy yesterday, although all parties claim strikes are not on the agenda. Mr Walsh refused to comment on the progress of negotiations, but said he is confident a peaceful solution will be reached. "I firmly believe the people working for us understand the challenges we face," he said. "There is no reason whatsoever for BA to face industrial action."
The shareholder reaction was mixed. There was some acknowledgement that such a dire situation may require tough measures, but even directors' warm commendations of BA cabin crews drew some ire. Frank Smith, a shareholder, said: "It is no use getting up there and preaching about respect for the cabin crews and then kicking them in the teeth."
And despite repeated emphasis on the dire state of the industry, not everyone at the AGM was convinced. One shareholder claimed Mr Walsh's oft-repeated claim that the company is "fighting for survival" is part of the problem. "Why is Mr Walsh talking BA into the ground?" the investor said. "I am shocked and dismayed our chief executive is talking in a way that has such a negative effect on the share price."
Another shareholder suggested the group start talking to Sir Richard Branson about his recent claims he will buy BA when the shares have dropped below £1. But Mr Broughton had short shrift for Virgin Atlantic's announcement of a £68m profit in May. "Richard Branson is rather more talk than substance," he said. "If you talk to some of the analysts you would see things represented rather differently."
Lemmings: No animals were harmed...
Symbolic animals may be the latest good idea for a PR stunt – but just make sure you can guarantee the participants' health and safety. When GMB trade union organisers decided to bring 12 live lemmings to yesterday's British Airways AGM to illustrate their view of the future under chief executive Willie Walsh, little did they know they would be facing a grilling of their own from the RSPCA. The furry critters hired for the occasion had to be taken away after inspectors at the Queen Elizabeth II conference centre found that they were "stressed".