18th Jul 2006 11:30
British Airways PLC18 July 2006 British Airways Annual General meeting QE11 Conference Centre Tuesday, July 18 Chief Executive's Address Many of you will remember my predecessor, Sir Rod, remarking that he'd had lotsof luck in this job - all of it bad. Over the last nine months, there have beenone or two moments when I wished that his legacy hadn't been quite socomprehensive. As the Chairman has outlined, there have been downs as well as ups this year.But we should not overlook the real successes we have had - and the progress wehave made in tackling some of the most fundamental challenges we face. I was particularly pleased to see our shorthaul business return to profit thisyear for the first time in ten years. This is a great achievement in what has become the most intensely competitiveair market in the world, and one in which certain low-cost carriers appear tothink that it is only a matter of time before they sweep away all opposition. Well, we have shown we won't be swept away. This move into profit is just thebeginning. We have performed particularly well on our shorthaul routes out ofHeathrow, where our network and frequency are much appreciated by our businesscustomers. At Gatwick, where our operation is more focused on our leisure customers, wehave set a clear target for profit improvement - based on our plans for reducingcosts and increasing revenue. We have just concluded an important agreement with our Gatwick trade unions tomerge our longhaul and shorthaul cabin crews, generating more than £13 millionin annual savings. The agreement creates a single, simplified operation that removes duplication,introduces new working practices and - most important of all - maintainsstandards of customer service. It is an excellent example of how all of us in British Airways can work togetherto recognise that the industry has changed, face up to the new realities, andget ourselves in shape to take on and beat the competition. We have launched six new destinations from Gatwick this summer, we will open afurther route (to Salzburg) in December, and we continue to look for profitableopportunities elsewhere in continental Europe. At the end of April, we launched our new low one-way fares on shorthaul, whichearned extensive coverage in the press and was followed up with the television,radio and internet advertising campaigns that many of you will have seen andheard. Great value fares. Frequent flights. Convenient airports. Free refreshmentson board. More leg room. No baggage charge. The product we offer on shorthaulis second to none. In the regions, we have relaunched our CitiExpress business as BA Connect: witha single-class cabin and a simple two-level fare structure. The new operationhas made a useful start, but the UK regions are a very different market fromHeathrow or Gatwick - and we have made clear that BA Connect must deliver. Across all BA's domestic and European services, our passenger loads are up fourper cent in the first three months of this financial year, compared with thesame quarter last year. The message is clear: customers know that BritishAirways represents excellent value on shorthaul - and more and more of them wantto fly with us. The growth of our business is certainly not confined to shorthaul. Last autumnwe opened a new route to Bangalore and, with extra frequencies to Delhi, Mumbaiand Chennai, our services to India have more than doubled in the last 12 monthsfrom 19 a week to 42. Apart from the United States, India is now our largestoverseas market. We recently announced that we would be launching another new route, to Calgaryin Canada, increasing frequency to Brazil's business capital, Sao Paulo, andadding an eighth daily service from Heathrow to New York JFK. These highlights of the winter longhaul schedule will be hugely reinforced bythe introduction of our upgraded Club World cabins - with new seats that willconsolidate our lead in flat-bed comfort and style. We will also see the phasing-in of our digital in-flight entertainment systemsfor all longhaul customers, offering a choice of dozens of film, TV and audioprogrammes that you can start, stop and rewind just as you would at home. Another success, and one of the reasons customers come to us, is the user-friendliness of our ba.com website. We now sell up to 25,000 seats online every day - a higher total than everbefore, as more and more customers come to enjoy the ease, flexibility andcomprehensive flight information that ba.com provides. Visiting ba.com is about so much more than simply choosing your flight. You canselect your seat, check in - and print off your boarding pass at home or in theoffice. Customers really appreciate this extra convenience and the opportunity itprovides to skip the queues at conventional check-in desks. In April, we moved to a system of online or self-service check-in only fordomestic flights - and it has been a great success. I am delighted that we havebeen able to extend this facility to parents travelling with children, andremove what was often one of the high-stress phases of a family journey. Worldwide, one in three of our customers now buys their seat direct from us.The vast majority of these book via ba.com, and we aim to raise direct bookingsto 50 per cent by the time we move to Heathrow's Terminal 5 in March 2008. It would be premature to regard Terminal 5 as a success story at this stage, butI am very pleased with the advances we have made in our preparations. More than 5,000 of our staff have attended 'Fit for 5' information and trainingevents, and we have made important progress with our unions in agreeing changesto working practices. We have already reached agreement with 800 of our groundtransport staff, and continue to talk constructively with the unions in otherdepartments. Terminal 5 means a great deal to us. For the first time in 40 years, we will beable to bring our core operation under one roof, bringing us significantoperating efficiencies and offering our customers an airport experience to rivalthe best in the world. T5 is very exciting. But we need to ensure that increased passenger capacity ismatched by greater runway capacity to ensure Heathrow's continuing success. I want to spend a minute or two on this issue - because it is central not onlyto the future of our airline, but also to the wider environmental challengefaced by the whole aviation industry. Heathrow celebrated its 60th birthday a couple of months ago - and it stillmakes do with the two runways it started with in 1946. The shoe has beenpinching for a long time. The truth is that the airport is falling further andfurther behind the Continental hubs in terms of aircraft-handling capacity androute network. Frankfurt, Amsterdam and Paris Charles de Gaulle have been well ahead on bothcounts for some years. In the current summer schedule, Madrid has alsoovertaken Heathrow in terms of runway capacity, and Munich has begun servingmore destinations direct. It is absolutely essential that to reverse Heathrow's slide and underpin theeconomic competitiveness of UK plc, the airport is given approval to make fulluse of its existing runways and to build a short, third runway. The Government has set strict environmental conditions in terms of noise andlocal air quality - and I believe we are making good headway toward satisfyingthem. We look forward with optimism to the Government's 'Progress Report' onits aviation White Paper at the end of this year. Of course, it is not only local environmental factors that matter. Opponents ofHeathrow's development will say that expansion should not take place becauseallowing more flights would accelerate global warming. Indeed, we will be told - in some quarters we are being told already - that anyexpansion of aviation anywhere is a bad thing and should be prevented. I fully accept that climate change is a fundamental issue that the aviationindustry must address. But we need more context in this debate. The UN's Inter-Governmental Panel on Climate Change forecasts that global carbondioxide emissions from air transport will grow to five per cent of all emissionsby 2050, compared with between two and three per cent now. The contribution of UK aviation to global CO2 emissions is just 0.1 per cent.So anyone who tells you they are going to save the planet by cutting down onflying is deluding themselves. You cannot solve global warming by beating upaviation. What should the industry do? At British Airways, we have spent seven yearsarguing for a system of emissions trading as the most efficient andenvironmentally effective means of limiting aviation's impact on climate change. People have listened to us. The UK Government has taken up the issue within theEU, and the European Commission now intends to publish draft legislation in theautumn. Emissions trading means airlines must cut or pay. If they cannot cut their owncarbon emissions, they must pay for the carbon reductions achieved by companiesin industries with greater practical potential for lowering their CO2 output -sectors such as power generation, oil refining or steelmaking. In tacklingglobal warming, what matters is the world's total production of CO2, not oneindustry's. It is important that the European Commission gets the details right. Forexample, we think the scheme should apply - initially at least - to flights thatstart and end within the EU, and that the initial carbon allocations to airlinesshould relate to past emissions performance. In summary, we urge the Commission to go for simplicity. Over-complication of ascheme that has to apply to 25 member countries will only cause delay orinconsistent implementation. The important thing is to bring the scheme into operation on schedule in 2008,or as soon as possible thereafter. A working system of emissions trading inEurope could provide a model for the rest of the world - in time helping towarda global solution for what is truly a global problem. Ladies and gentlemen, tackling our environmental impact will be crucial to ourbusiness success in the future. We have enjoyed a variety of successes this year. But as you all know, we mustovercome considerable short-term and long-term challenges to ensure that oursuccess continues. I thank you for your support, and for your continued appreciation of andcommitment to our strategic objectives. I am proud to lead British Airways. And I am confident that, with your help, wewill make this airline an enduring source of pride for everyone associated withit for many years to come. END Certain statements included in this statement may be forward-looking and mayinvolve risks and uncertainties that could cause actual results to differmaterially from those expressed or implied by the forward-looking statements. Forward-looking statements include, without limitation, projections relating toresults of operations and financial conditions and the company's plans andobjectives for future operations, including, without limitation, discussions ofthe company's business and financing plans, expected future revenues andexpenditures and divestments. All forward-looking statements in this report arebased upon information known to the company on the date of this report. Thecompany undertakes no obligation to publicly update or revise anyforward-looking statement, whether as a result of new information, future eventsor otherwise. It is not reasonably possible to itemise all of the many factors and specificevents that could cause the company's forward-looking statements to be incorrector that could otherwise have a material adverse effect on the future operationsor results of an airline operating in the global economy. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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