Record profits for BA but boss refuses bonus

The troubled opening of Heathrow's Terminal 5 cost BA boss Willie Walsh his annual bonus today, despite the airline posting record profits.

The chief executive said he felt any award would have been "inappropriate" given the problem-hit move to the new building in March. It saw dozens of flights cancelled, thousands of passengers separated from their bags and dealt a huge blow to the airline's reputation.

Mr Walsh was speaking after unveiling record pre-tax profits of £883 million for the year to March 31, up 45% on the previous year.

The performance has triggered a £35 million bonus pool for BA's other 42,000 staff, as well as the company's first dividend payment for seven years.

Mr Walsh said: "I felt in the context of the disappointing opening associated with Terminal 5 that it would be inappropriate for me to take a bonus despite the excellent financial performance of the company."

Under his remuneration package, he is entitled to a maximum bonus of 100% of salary depending on a series of criteria. During the year to March 2007 he was paid a salary of £625,000.

Mr Walsh said there had been no pressure "whatsoever" from other board members and big investors for him to forgo his bonus payment.

He came under huge pressure to quit in the wake of the disastrous T5 opening on March 27, making a series of public apologies. The episode went on to cost two senior BA executives their jobs.

Mr Walsh said he felt his position was not under pressure.

"I feel like I have just won the premier league with these financial results," he added.

The profits hike came despite a year of soaring oil costs which saw the airline's fuel bill top £2 billion.

Mr Walsh said: "This is an outstanding financial result for the company despite rising fuel prices and significant economic slowdown in the last six months.

"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 - the first since 2001."

But he warned the current financial year would be challenging due to the prospect of continued high oil prices, the financial fallout from the T5 delays, and general economic uncertainty.

Crude oil remains around the 125 US dollar a barrel mark, twice its cost from a year ago.

BA said its fuel bill could be as high as £3 billion this year - more than a quarter of the carrier's full-year costs.

The airline, which uses approximately six million tonnes of jet fuel a year, also revealed it takes a £16 million profit hit for every one dollar rise in oil prices.

Citing fuel prices and costs from the Terminal 5 delays, BA said the three months to June 30 will be "particularly difficult".The quarter's results will also be impacted by the delays in moving to Terminal 5.

The airline added: "The full year will also be challenging, against an uncertain economic outlook. 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."

Mr Walsh said T5 is "working well" and has received around two million passengers since it opened. A number of longhaul routes, including the airline's blue riband New York service, will start from the terminal on June 5.

The airline's full-year revenues were up 3.1% to £8.75 billion. It is forecasting a rise of around 4% in revenues for the existing year.

Steve Turner, Unite's national secretary for civil aviation, said BA's results were excellent news and he was pleased staff will be sharing the success.

He said: "While we applaud Willie Walsh's decision to forgo his bonus, we need to see BA use these profits to address the ongoing concerns of our members.

"The uncertain economic forecast for the industry, contentious reorganisation across the company, talk of consolidation with other carriers and the rising cost of living are creating tremendous pressures on the workforce."

Mr Walsh offered no more detail on the prospect of a tie-up between BA and two US rivals, American Airlines and Continental Airlines.

BA said last month it was "exploring opportunities" with the two carriers, with speculation over possible outcomes ranging from a merger to the trio co-ordinating schedules, fares and frequent flyer programmes for transatlantic flights.

Mr Walsh said today that talks between the three operators were "ongoing".

Shares in BA were up 4 per cent today.

BA will launch an "OpenSkies" service from Paris Orly to New York JFK on 19 June.

This follows the groundbreaking deal of the same name brokered last year between the US and the European Union. It allows carriers to fly transatlantic routes from different countries for the first time.

The deal has also seen US carrier Continental Airlines buy two slots at Heathrow so it can start its own UK-based service, and there are hopes the increased competition could bring down prices.

Broker Citi said BA's results were better than expected, and picked out the carrier's 0.7% reduction in operating costs as a highlight.

Analyst Andrew Light said: "BA would appear to be successfully passing on higher fuel costs."

He said he expected fuel costs to be £850 million higher during the current year. This would see operating profits come in between £150 million and £180 million, down from £875 million, he added.