Sky high profits but boss gives up bonus

May 17 2008 by Iain Laing, The Journal

THE troubled opening of Heathrow’s Terminal 5 cost BA boss Willie Walsh his annual bonus, 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 £883m for the year to March 31, up 45% on the previous year. The airline’s full-year revenues were up 3.1% to £8.75bn. It is forecasting a rise of around 4% in revenues for the existing year.

The performance has triggered a £35m 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 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 £2bn.”

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.

BA said its fuel bill could be as high as £2.3bn this year – more than a quarter of the carrier’s full-year costs.

The airline, which uses approximately six million tonnes of fuel a year, also revealed it takes a £16m 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 affected by delays in moving to Terminal 5.