BRITISH Airways has posted its first dividend since before the 9/11 terrorist attacks, as chief executive Willie Walsh yesterday waived his £700,000 bonus due to the Terminal 5 opening fiasco.
The 5p divi payout comes on the back of a 45 per cent leap in profits to £883 million for the year to the end of March.
However, analysts warned of turbulence ahead, with one broker predicting BA would struggle to break even this year.
Walsh, b
elow, said: "I am not getting a bonus. I felt it would be inappropriate in the context of the very disappointing opening of Terminal 5 in March.
"So despite the fact that it was a record year in terms of our financial performance, I advised the chairman (Sir Martin Broughton] that I thought it would be inappropriate. I have made it very clear I was very disappointed at the way we had performed."
Despite this, 43,000 members of staff at BA will share a £35m bonus on the back of the record profits, with a minimum payout of £500.
On the general trading performance, 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 per cent operating (profit] 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 company's shares closed up 4 per cent at 233p.
However, the airline gave warning that profit levels in the first quarter of its new trading year are under strong pressure.
Some analysts believe BA is only breaking even in current trading, as the economic slowdown takes hold and the price of oil remains stratospheric. Broker UBS was more pessimistic, saying BA could be loss-making this year. "The higher fuel cost almost wipes out 2008-9 earnings before interest and tax," UBS said.
BA warned its fuel bill could soar by £1 billion this year if oil prices remained at current levels.
The airline spent £2.1bn on fuel during the past year, more than a quarter of its total costs.
But despite the doubling in the price of oil during its last financial year, fuel and oil costs were just 6.4 per cent higher over the period, it said. BA's hedging operation has allowed the group to buy well over half of this year's fuel needs at prices between $82 and $90 a barrel.
With crude currently costing almost $130 a barrel, the non-hedged exposure leaves the airline facing a huge hit if the prices do not fall back. Walsh said yesterday that BA loses £16m in profit for every one dollar rise in oil prices.
The airline said it was reviewing its capacity, costs and network against the backdrop of economic pressures and high fuel prices, and forecast revenue growth at the low end of its previous forecast range of between 4 per cent and 4.5 per cent.
Walsh added: "Many (airlines] will struggle to survive the way oil prices are."
But he added that BA would enter the more testing environment from a position of strength, albeit with its 2007-8 results being "the high point, certainly in the short term".
Walsh reiterated that the company remained in talks with American Airlines and Continental Airlines to explore possible opportunities to cooperate, but would not comment further.
Merrill Lynch said in a research note: "While BA's valuation appears low, earnings visibility is limited with uncertainty on both the economic backdrop and fuel costs. We remain cautious and maintain our 'neutral' recommendation."
The full article contains 620 words and appears in The Scotsman newspaper.
