Broughton gives BA chief 18 months to grow profits

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The Independent Online

The new chairman of British Airways yesterday gave the management an 18-month deadline to get profits up to acceptable levels and said that a resumption of dividend payments was back on the agenda.

The new chairman of British Airways yesterday gave the management an 18-month deadline to get profits up to acceptable levels and said that a resumption of dividend payments was back on the agenda.

Speaking after taking over as chairman from Lord Marshall at BA's annual meeting, Martin Broughton, the former chief executive of the tobacco company BAT, said that provided BA encountered no further "headwinds", he expected the airline to achieve 10 per cent operating margins by the end of next year.

Last year, when BA made a pre-tax profit of £230m, the operating margin was 5.4 per cent - an improvement of 1.6 points on 2002-03 but still way below low-cost rivals such as Ryanair which is still reporting profit margins of more than 20 per cent.

Mr Broughton indicated that the dividend decision would be heavily influenced by BA's success in tackling its debt burden, which it is aiming to reduce from £4bn to £3bn over the same 18-month period. "A resumption of dividends is on the agenda for sensible debate whereas a year ago, it simply wasn't," Mr Broughton said. "But it is a question of when and how much."

He played down reports that one of his priorities would be to find a successor to Rod Eddington as chief executive. He said that although this was something he would tackle at some stage during his chairmanship, he was only 57 and did not need to retire until he reached 70.

Mr Broughton said Lord Marshall would be a "hard act to follow" and that his policy as chairman would be "more of the same". This, he added, would mean more relentless cost- cutting and productivity improvements.

BA's baggage handling and check-in staff have threatened strike action after a breakdown in pay talks. Mr Eddington said the airline and its unions were seeking to agree a three-year deal offering "job stability and a strong, robust company for the future". He made no apology for the fact that this would mean more efficiency improvements on top of the £869m achieved under the Future Shape and Size Programme and the £300m in additional labour savings announced this year. "Finding ways to be more productive is an essential part of staying in the game. It's a never-ending journey."

Earlier, shareholders gave Lord Marshall a warm send-off after 21 years with the airline, 10 as chief executive and the remainder as chairman. Along with Lord King and BA's former finance director Gordon Dunlop, he was one of the triumvirate who turned BA from what Mr Eddington called a "moribund state-owned airline into a global brand leader", taking it into the private sector and overseeing the takeover of British Caledonian and then the creation of the Oneworld alliance.

Apart from one shareholder who called Lord Marshall "arrogantly complacent" about BA's financial performance, he received widespread support culminating in a standing ovation from the 400 investors present.

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