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|British Airways Plc Annual Report and Accounts 31 December 2014|
In accordance with the UK Listing Authority Rules, the following documents have been submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM and on the website www.iagshares.com:
In addition, the information below, some of which is extracted from the Annual Report and Accounts 2014, is included solely for the purpose of complying with the Disclosure and Transparency Rule 6.3.5 (“DTR 6.3.5”), which requires certain material to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the full Annual Report and Accounts 2014.
BRITISH AIRWAYS RESULTS
1 January 2014 – 31 December 2014
All of the information below was contained within the Results Announcement issued by International Consolidated Airlines Group S.A. (‘IAG’) on 27 February 2015.
British Airways Plc (‘BA’ or ‘the Group’) is the UK’s largest international scheduled airline and one of the world’s leading global premium airlines. The Group’s principal place of business is London with significant presence at Heathrow, Gatwick and London City airports. Operating one of the most extensive international scheduled airline networks, together with its joint business agreements, code share and franchise partners, BA flies to more than 400 destinations worldwide. BA’s vision is to be the most admired airline.
We have continued to use technology to innovate and enhance customer loyalty, including introducing digital membership cards for British Airways Executive Club members, and updating the BA app, allowing customers using Heathrow Terminal 5 and Terminal 3 to receive ‘push notifications’ on smartphones informing them of their gate number, when it is open and when their aircraft is boarding.
Looking ahead, we are introducing new routes to destinations in Spain, Greece, Egypt, Malaysia and elsewhere.
BA will continue to focus on customer satisfaction and improved operational performance, focusing on investments which matter most to the customer and on the use of technology to improve the customer journey. We have continued to invest in technology, which is a key element to revenue growth. This allows BA to better understand the needs of our customers and better target marketing campaigns where they will have the greatest penetration.
More emphasis will be placed on improving revenue and profit contributions from the short-haul business to ensure it delivers a sustainable return on its own merit. Improvements include seat densification, a new interior, and active management of the short-haul network.
The AJB now incorporates the merged American Airlines and US Airways, adding 27 new transatlantic routes and nine new European destinations to the AJB’s network. Where appropriate, BA will continue to seek to deepen other partnerships through the extension of codeshare relationships and the development of joint businesses and continues to be committed to the future development of the oneworld alliance, which welcomed TAM Airlines in 2014.
Available capacity (ASKs) increased by 5.9 per cent as a result of the addition of new aircraft which resulted in an increase in passengers carried to 42 million from 40 million in previous years. A strong commercial performance has meant that this additional capacity has mostly been filled with traffic as RPKs have increased by 5.4 per cent although load factor has only marginally decreased by 0.3 percentage points.
Passenger revenue per RPK ended the year 2.1 per cent lower than last year mainly as a result of adverse impact on foreign exchange.
Fuel costs decreased year-on-year by £240 million to £3,515 million compared to £3,755 million in the prior year. The decrease is mainly attributed to a reduction in the average fuel price, net of the impact of hedging, and the favourable impact of foreign exchange offset by the increase in volume.
Group expenditure excluding fuel has increased by £214 million to £7,229 million, or a 3.1 per cent increase. Given that ASKs increased by 5.9 per cent, this represents a 2.7 per cent decrease in non-fuel costs per ASK driven mainly by cost saving initiatives around the business. Part of this decrease is also due to the favourable impact of foreign currency exchange rates, at a constant exchange rate non-fuel costs per ASK decreased by 1.1 per cent compared to the prior year.
Consistent with the increasing revenue trend mainly driven by volume, other operating costs have also increased. Depreciation, amortisation and impairment have increased due to the increase in depreciation from new aircraft deliveries and impact of changes to the depreciation policy on certain fleet. Handling charges, catering and other operating cost have also increased due to increased volume and incremental growth from BA Holidays. These were offset by reductions in engineering and other aircraft costs mainly driven by the cancellation of the long haul freighter service.
In total, non-operating items are an expense of £116 million in the current year (2013: £408 million) a decrease of £292 million. The three principal changes in non-operating income and costs were a favourable share in profit of associates of £39 million (2013: £65 million loss) and the non-recurring impact of the revaluation of the convertible bond liability in 2013 giving rise to a £164 million charge offset by the adverse impact of the fuel derivative losses of £37 million (2013: gain of £17 million).
Profit before tax for the year was £859 million (2013: £300 million).
The tax charge on continuing operations for the year ended 31 December 2014 was £157 million (2013: £16 million). The UK cash tax charge for the year was reduced by the utilisation of the remaining £80 million of Advanced Corporation Tax (ACT) paid on dividends in previous years. The Group profit before tax was £859 million but is stated after a gain of £39 million from the post-tax share of associates for which no corporation tax is reflected in the financial statements. After adjusting for this and movements relating to prior years, the Group’s effective tax rate was 20.8 per cent, compared to the UK corporation tax rate of 21.5 per cent
During the year, the net deferred tax liability has decreased by £222 million to £222 million, primarily as a result of an increase in deferred tax assets related to the pension liabilities, given significant actuarial losses recognised in the year, and the significant mark-to-market losses on hedging instruments driven by the sharp decline in fuel price.
Profit for the year was £702 million (2013: £281 million).
During the year the Group took delivery of three Airbus A320 aircraft, five Airbus A380 aircraft, two Boeing 777-300 aircraft, four Boeing 787-800 aircraft and one Embraer E190 aircraft.
During 2013, the Group obtained an additional source of financing from the issuance of BA’s Enhanced Equipment Trust Certificates (‘EETC’). This was the first time that the Group had used EETC’s and that this form of financing had been used in the UK. A total of $927 million was raised from the issuance which was used to fund the purchase of six Airbus A320-200s, two Boeing 777-300ERs and six Boeing 787-800s. In connection with this issuance, the Group also received an additional $369 million of funding from Japanese Operating Lease structure with Call Option (‘JOLCO’) investors bringing the total finance lease facility available to $1.3 billion. As of 31 December 2014, £nil (2013: $431 million (£264 million)) of the EETC and £nil (2013: $170 million (£104 million)) of the JOLCO facility were undrawn.
In addition, the Group had undrawn long-term committed aircraft financing facilities totalling £1.8 billion (2013: £1.7 billion) and further committed general facilities of £0.6 billion (2013: £0.5 billion).
No dividend will be paid for the year ending 31 December 2014.
Principle risks and uncertainties
The risks include competition, consolidation and deregulation, government intervention, infrastructure constraints, brand reputation, economic conditions, employee relations, failure of critical suppliers, failure of a critical IT system, pandemic, safety/security incidents, events causing significant network disruption, debt funding, fuel price, pensions and compliance with Competition, Bribery and Corruption law.
Directors’ responsibility statement
Note to Editors:
Certain statements included in this report are forward-looking and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements.
Forward-looking statements can typically be identified by the use of forward-looking terminology, such as "expects", "may", "will", "could", “should”, "intends", "plans", "predicts", "envisages" or "anticipates" and include, without limitation, any projections relating to results of operations and financial conditions and British Airways Plc (’BA’ or the’ Group’) as well as plans and objectives for future operations, discussions of the Group’s Business Plan, expected future revenues, financing plans and expected expenditures and divestments. All forward-looking statements in this report are based upon information known to the Group at the date of this report. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
It is not reasonably possible to itemise all of the many factors and specific events that could cause the Company’s forward-looking statements to be incorrect or that could otherwise have a material adverse effect on the future operations or results of an airline operating in the global economy. Further information on the primary risks of the business and the risk management process of the Group is given in the Annual Report and Accounts 2014; these documents are available on www.iagshares.com.
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