AGM chief executive address

British Airways PLC
18 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 lots
of luck in this job - all of it bad.  Over the last nine months, there have been
one or two moments when I wished that his legacy hadn't been quite so
comprehensive.



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 we
have made in tackling some of the most fundamental challenges we face.



I was particularly pleased to see our shorthaul business return to profit this
year for the first time in ten years.



This is a great achievement in what has become the most intensely competitive
air market in the world, and one in which certain low-cost carriers appear to
think 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 the
beginning.  We have performed particularly well on our shorthaul routes out of
Heathrow, where our network and frequency are much appreciated by our business
customers.



At Gatwick, where our operation is more focused on our leisure customers, we
have set a clear target for profit improvement - based on our plans for reducing
costs and increasing revenue.



We have just concluded an important agreement with our Gatwick trade unions to
merge our longhaul and shorthaul cabin crews, generating more than £13 million
in annual savings.



The agreement creates a single, simplified operation that removes duplication,
introduces new working practices and - most important of all - maintains
standards of customer service.



It is an excellent example of how all of us in British Airways can work together
to recognise that the industry has changed, face up to the new realities, and
get ourselves in shape to take on and beat the competition.



We have launched six new destinations from Gatwick this summer, we will open a
further route (to Salzburg) in December, and we continue to look for profitable
opportunities elsewhere in continental Europe.



At the end of April, we launched our new low one-way fares on shorthaul, which
earned extensive coverage in the press and was followed up with the television,
radio and internet advertising campaigns that many of you will have seen and
heard.



Great value fares.  Frequent flights.  Convenient airports.  Free refreshments
on board.  More leg room.  No baggage charge.  The product we offer on shorthaul
is second to none.



In the regions, we have relaunched our CitiExpress business as BA Connect: with
a single-class cabin and a simple two-level fare structure.  The new operation
has made a useful start, but the UK regions are a very different market from
Heathrow 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 four
per cent in the first three months of this financial year, compared with the
same quarter last year.  The message is clear: customers know that British
Airways represents excellent value on shorthaul - and more and more of them want
to fly with us.



The growth of our business is certainly not confined to shorthaul.  Last autumn
we opened a new route to Bangalore and, with extra frequencies to Delhi, Mumbai
and Chennai, our services to India have more than doubled in the last 12 months
from 19 a week to 42.  Apart from the United States, India is now our largest
overseas market.



We recently announced that we would be launching another new route, to Calgary
in Canada, increasing frequency to Brazil's business capital, Sao Paulo, and
adding an eighth daily service from Heathrow to New York JFK.



These highlights of the winter longhaul schedule will be hugely reinforced by
the introduction of our upgraded Club World cabins - with new seats that will
consolidate our lead in flat-bed comfort and style.



We will also see the phasing-in of our digital in-flight entertainment systems
for all longhaul customers, offering a choice of dozens of film, TV and audio
programmes 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 ever
before, as more and more customers come to enjoy the ease, flexibility and
comprehensive flight information that ba.com provides.



Visiting ba.com is about so much more than simply choosing your flight.  You can
select your seat, check in - and print off your boarding pass at home or in the
office.



Customers really appreciate this extra convenience and the opportunity it
provides to skip the queues at conventional check-in desks.



In April, we moved to a system of online or self-service check-in only for
domestic flights - and it has been a great success.  I am delighted that we have
been able to extend this facility to parents travelling with children, and
remove 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 bookings
to 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, but
I 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 training
events, and we have made important progress with our unions in agreeing changes
to working practices.  We have already reached agreement with 800 of our ground
transport staff, and continue to talk constructively with the unions in other
departments.



Terminal 5 means a great deal to us.  For the first time in 40 years, we will be
able to bring our core operation under one roof, bringing us significant
operating efficiencies and offering our customers an airport experience to rival
the best in the world.



T5 is very exciting.  But we need to ensure that increased passenger capacity is
matched 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 only
to the future of our airline, but also to the wider environmental challenge
faced by the whole aviation industry.



Heathrow celebrated its 60th birthday a couple of months ago - and it still
makes do with the two runways it started with in 1946.  The shoe has been
pinching for a long time.  The truth is that the airport is falling further and
further behind the Continental hubs in terms of aircraft-handling capacity and
route network.



Frankfurt, Amsterdam and Paris Charles de Gaulle have been well ahead on both
counts for some years.  In the current summer schedule, Madrid has also
overtaken Heathrow in terms of runway capacity, and Munich has begun serving
more destinations direct.



It is absolutely essential that to reverse Heathrow's slide and underpin the
economic competitiveness of UK plc, the airport is given approval to make full
use of its existing runways and to build a short, third runway.



The Government has set strict environmental conditions in terms of noise and
local air quality - and I believe we are making good headway toward satisfying
them.  We look forward with optimism to the Government's 'Progress Report' on
its aviation White Paper at the end of this year.



Of course, it is not only local environmental factors that matter.  Opponents of
Heathrow's development will say that expansion should not take place because
allowing more flights would accelerate global warming.



Indeed, we will be told - in some quarters we are being told already - that any
expansion of aviation anywhere is a bad thing and should be prevented.



I fully accept that climate change is a fundamental issue that the aviation
industry must address.  But we need more context in this debate.



The UN's Inter-Governmental Panel on Climate Change forecasts that global carbon
dioxide emissions from air transport will grow to five per cent of all emissions
by 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 on
flying is deluding themselves.  You cannot solve global warming by beating up
aviation.



What should the industry do? At British Airways, we have spent seven years
arguing for a system of emissions trading as the most efficient and
environmentally effective means of limiting aviation's impact on climate change.



People have listened to us.  The UK Government has taken up the issue within the
EU, and the European Commission now intends to publish draft legislation in the
autumn.



Emissions trading means airlines must cut or pay.  If they cannot cut their own
carbon emissions, they must pay for the carbon reductions achieved by companies
in industries with greater practical potential for lowering their CO2 output -
sectors such as power generation, oil refining or steelmaking.  In tackling
global warming, what matters is the world's total production of CO2, not one
industry's.



It is important that the European Commission gets the details right.  For
example, we think the scheme should apply - initially at least - to flights that
start and end within the EU, and that the initial carbon allocations to airlines
should relate to past emissions performance.



In summary, we urge the Commission to go for simplicity.  Over-complication of a
scheme that has to apply to 25 member countries will only cause delay or
inconsistent 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 in
Europe could provide a model for the rest of the world - in time helping toward
a global solution for what is truly a global problem.



Ladies and gentlemen, tackling our environmental impact will be crucial to our
business success in the future.



We have enjoyed a variety of successes this year.  But as you all know, we must
overcome considerable short-term and long-term challenges to ensure that our
success continues.



I thank you for your support, and for your continued appreciation of and
commitment to our strategic objectives.



I am proud to lead British Airways.  And I am confident that, with your help, we
will make this airline an enduring source of pride for everyone associated with
it for many years to come.



END



Certain statements included in this statement may be forward-looking and may
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 include, without limitation, projections relating to
results of operations and financial conditions and the company's plans and
objectives for future operations, including, without limitation, discussions of
the company's business and financing plans, expected future revenues and
expenditures and divestments. All forward-looking statements in this report are
based upon information known to the company on 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.






                      This information is provided by RNS
            The company news service from the London Stock Exchange