FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
FURNISHED PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
04 November 2005
BRITISH AIRWAYS Plc
(Registrant's Name)
Waterside HBA3,
PO Box 365
Harmondsworth UB7 0GB
United Kingdom
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-F X Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule101(b)(1)
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a
Form 6-K if submitted solely to provide an attached annual report to security
holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7)
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a
Form 6-K if submitted to furnish a report or other document that the registrant
foreign private issuer must furnish and make public under the laws of the
jurisdiction in which the registrant is incorporated, domiciled or legally
organised (the registrant's "home country"), or under the rules of the home
country exchange on which the registrant's securities are traded, as long as the
report or other document is not a press release, is not required to be and has
not been distributed to the registrant's security holders, and, if discussing a
material event, has already been the subject of a Form 6-K submission or other
Commission filing on EDGAR.
Indicate by check mark whether by furnishing the information contained in this
Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b):
CONTENTS
1. Interim Results
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorised.
BRITISH AIRWAYS Plc
By: /s/_________________________
Name: Alan Buchanan
Title:Company Secretary
Date 04 November 2005
INDEX TO EXHIBITS
Exhibit No. Description
1. Interim Results
REASONABLE RESULTS IN Q2
- Pre-tax profit of GBP241 million
- Operating profit of GBP261 million
- Revenue up 8.2 per cent
- Unit costs up 2.2 per cent
- Fuel costs up 51.3 per cent
- Net debt down at GBP2.4 billion
British Airways today announced a pre-tax profit of GBP241 million (2004: GBP293
million) for the three months ended September 30, 2005. The 2004 result
benefited by GBP86 million from the sale of shares in Qantas. The three month
pre-tax figures took the result for the half-year to GBP365 million profit
(2004: GBP368 million).
Operating profit for the quarter was GBP261 million (2004: GBP245 million). The
operating margin was 11.8 per cent (2004: 12 per cent). Yields in the second
quarter were up 1.3 per cent (2004: 5.1 per cent down). The operating profit for
the half-year was GBP437 million (2004: GBP374 million) giving an operating
margin of 10.2 per cent (0.7 points up).
The cost of the Gate Gourmet dispute and the associated unlawful industrial
action is estimated at between GBP35-GBP45 million. This does not have a
material impact on the quarterly financial comparisons as the airline also
suffered operational disruption in the same period of last year.
The board has decided that no interim dividend should be paid.
Willie Walsh, British Airways' chief executive, said: "This is a reasonable set
of results driven by improvements in revenue, seat factor and yield. It is
clear, however, that we need to re-energise our drive on controllable costs. We
have demonstrated time and again that it is possible to offer world-class
service while improving unit costs."
"Costs are up in most areas. Fuel was the biggest single contributor, up a
staggering 51.3 per cent.
"We must ensure a successful move to Heathrow Terminal 5 in 2008 and redouble
our efforts to make British Airways more focused and better able to serve all of
our customers."
Martin Broughton, British Airways' chairman, said: "Continued capacity restraint
by the industry is resulting in a more stable price environment. This, coupled
with good demand for premium traffic, in particular the growth in leisure
premium, has delivered a small yield improvement. Assuming continued stable
economies and a rational capacity environment, some yield improvement is now
expected for this financial year. Consequently, revenue is now expected to grow
by between 6 - 7 per cent, up 0.5 points from our previous guidance."
more
Reasonable results Q2../2
Mr Broughton added: "Despite the improved revenue outlook, market conditions
remain broadly unchanged as significant promotional activity is required to
maintain seat factors.
"Fuel costs continue to be a challenge for the industry, but our guidance is
unchanged with total fuel costs expected to be up by GBP525 million this year."
Group turnover for the second quarter was GBP2,205 million (2004: GBP2,038
million), 8.2 per cent up on a flying programme 2.4 per cent up, measured in
available tonne kilometres (ATKs). Traffic volumes, measured in revenue
passenger kilometres (RPKs), were up 3.7 per cent. Seat factor was up 1.1 points
at 79.6 per cent on capacity 2.2 per cent higher in available seat kilometres
(ASKs).
Unit costs increased by 2.2 per cent on the same period last year. This reflects
a net cost increase of 4.7 per cent on capacity 2.4 per cent higher in ATKs.
Fuel costs increased by 51.3 per cent due to the increase in fuel prices, net of
hedging. Employee costs were up 3.3 per cent. The increases were partially
offset by continued reductions in selling costs.
Operating cashflow for the six months was GBP530 million (2004: GBP484 million).
Including current interest bearing deposits, the cash position at September 30,
2005 was GBP1,925 million, up GBP243 million compared with March 31, 2005. Net
debt was GBP2,417 million, down by GBP505 million since the start of the year.
ends
November 4, 2005 122/KG/05
Note to Editors
- For all periods up to and including March 2005, British Airways has
previously prepared its Group financial statements under UK Generally
Accepted Accounting Practice (UK GAAP).
- British Airways restated its 2004/05 accounts to International Financial
Reporting Standards (IFRS). The restated accounts were published on July
4, 2005. All comparators referred to are based on these restated accounts.
British Airways' presentation to city analysts can be accessed via the internet
www.bashares.com at 9am. A webcast of British Airways' conference call to city
analysts can also be accessed via the internet www.bashares.com at 2pm.
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. Fuller information on
some of the factors which could result in a material difference is available in
the company's Annual Report and Accounts for the year ended March 31, 2005 which
is available on www.bashareholders.com.
The estimated disruption cost reflects the direct cost of the disruption and the
estimated revenue impacts, both direct and indirect. The estimate of GBP35 -
GBP45 million is based on assumptions the company considers reasonable, but are
judgemental.
INTERIM RESULTS 2005-2006 (unaudited)
OPERATING AND FINANCIAL STATISTICS (unaudited)
Three months ended Six months ended
September 30 Better/ September 30 Better/
2005 2004 (Worse) 2005 2004 (Worse)
Revenue GBPm 2,205 2,038 8.2% 4,264 3,940 8.2%
Operating profit GBPm 261 245 6.5% 437 374 16.8%
Profit before tax GBPm 241 293 (17.7)% 365 368 (0.8)%
Profit after tax GBPm 171 225 (24.0)% 261 268 (2.6)%
Net assets GBPm 2,030 1,287 57.7% 2,030 1,287 57.7%
Basic earnings per share p 15.3 20.6 (25.7)% 23.7 24.4 (2.9)%
Three months ended Six months ended
September 30 Better/ September 30 Better/
2005 2004 (Worse) 2005 2004 (Worse)
TOTAL GROUP OPERATIONS
TRAFFIC AND CAPACITY
RPK (m) 29,812 28,749 3.7% 57,580 55,832 3.1%
ASK (m) 37,452 36,639 2.2% 74,158 72,789 1.9%
Passenger load factor (%) 79.6 78.5 1.1pts 77.6 76.7 0.9pts
CTK (m) 1,183 1,202 (1.6)% 2,368 2,419 (2.1)%
RTK (m) 4,162 4,080 2.0% 8,111 7,989 1.5%
ATK (m) 5,847 5,709 2.4% 11,569 11,361 1.8%
Overall load factor (%) 71.2 71.5 (0.3) 70.1 70.3 (0.2)pts
Passengers carried (000) 9,767 9,822 (0.6)% 18,944 19,110 (0.9)%
Tonnes of cargo carried (000) 189 213 (11.3)% 382 429 (11.0)%
FINANCIAL
Operating margin (%) 11.8 12.0 (0.2) 10.2 9.5 0.7pts
pts
Passenger revenue per RPK (p) 6.01 5.93 1.3% 6.05 5.96 1.5%
Passenger revenue per ASK (p) 4.78 4.65 2.8% 4.70 4.57 2.8%
Cargo revenue per CTK (p) 10.23 9.82 4.2% 10.09 9.76 3.4%
Total traffic revenue per RTK (p) 45.96 44.68 2.9% 45.88 44.64 2.8%
Total traffic revenue per ATK (p) 32.72 31.93 2.5% 32.16 31.39 2.5%
Net operating expenditure
per RTK (p) 39.69 38.68 (2.6)% 40.49 39.95 (1.4)%
Net operating expenditure
per ATK (p) 28.25 27.64 (2.2)% 28.39 28.10 (1.0)%
Average fuel price before hedging
(US cents/US gallon) 175.69 129.92 (35.2)% 168.75 122.32 (38.0)%
TOTAL AIRLINE OPERATIONS (Note 1)
OPERATIONS
Average Manpower Equivalent (MPE) 46,144 46,179 0.1% 46,112 46,230 0.3%
ATKs per MPE (000) 126.7 123.6 2.5% 250.9 245.7 2.1%
Aircraft in service at
period end 288 287 1 288 287 1
Note 1:
Excludes non airline activity companies, principally, Airmiles Travel Promotions
Ltd, BA Holidays Ltd, BA Travel Shops Ltd, Speedbird Insurance Company Ltd and
The London Eye Company Ltd.
CHAIRMAN'S STATEMENT
Group Performance
Group profit before tax for the three months to September 30 was GBP241 million;
this compares with a profit of GBP293 million last year. The reduction primarily
reflects the non-recurrence of the GBP86 million profit on sale of our
investment in Qantas last year.
Operating profit - - at GBP261 million - - was GBP16 million higher than last
year. The operating margin was 11.8%, 0.2 points lower than last year. The
improvement in operating profit primarily reflects improvements in traffic
revenue, partially offset by the increase in the cost of fuel net of surcharges.
Group profit before tax for the six months to September 30 was GBP365 million,
GBP3 million worse than last year; operating profit - - at GBP437 million - -
was GBP63 million better than last year.
Operating margin for the half year - - traditionally the stronger of the two
halves - - was 10.2%, 0.7 points higher than last year.
Cash inflow from operating activities was GBP530 million for the six months,
with the closing cash, cash equivalents and short term deposits at GBP1,925
million representing a GBP243 million increase versus March 31, 2005. Net debt
fell by GBP505 million from March 31, 2005 to GBP2,417 million.
Turnover
For the three month period, group turnover - - at GBP2,205 million - - was up
8.2% on a flying programme 2.4% larger in ATKs. This reflected the impact of
fuel surcharges and an increase in both passenger revenue (up 5.1%) and cargo
revenue (up 2.5%). Passenger yields were up 1.3% per RPK (excluding fuel
surcharges), largely driven by cabin mix; seat factor was up 1.1 point at 79.6%
on capacity 2.2% higher in ASKs.
For the six month period, turnover improved by 8.2% to GBP4,264 million on a
flying programme 1.8% larger in ATKs. Passenger yields were up 1.5% per RPK
(excluding fuel surcharges) with seat factor up 0.9 points at 77.6% on capacity
1.9% higher in ASKs. Cargo volumes for the three month period (CTKs) were down
1.6% compared with last year, with yields (revenue/CTK) up 4.2%. For the six
month period, cargo volumes were down 2.1%, with yields up 3.4%.
Overall load factor for the quarter was down 0.3 points at 71.2%, and for the
half year down 0.2 points at 70.1%.
Costs
For the three month period, unit costs (pence/ATK) worsened by 2.2% on the same
period last year. This reflects a net cost increase of 4.7% on capacity 2.4%
higher in ATKs.
Total expenditure from operations was up 8.4% primarily reflecting fuel costs,
up by 51.3% due to the increase in fuel price net of hedging and employee costs,
up 3.3%. These increases were partially offset by continued reductions in
selling costs.
For the six month period, unit costs (pence/ATK) increased by 1.0% on the same
period last year. This reflects a net cost increase of 2.9% on capacity 1.8%
higher in ATKs.
Non Operating Items
Interest expense for the three month period reduced by GBP14 million from last
year to GBP54 million reflecting the impact of lower debt. Interest income at
GBP22 million was in line with last year.
Profit on sale of fixed assets and investments was GBP1 million, GBP83 million
lower than last year, reflecting the non-recurrence of the GBP86 million profit
on disposal of our investment in Qantas last year.
The share of profits in associates at GBP4 million was GBP17 million lower than
last year due to our share of Qantas' profit being included last year prior to
the disposal of our investment.
For the six month period, interest expense was GBP113 million, GBP21 million
lower than last year. The retranslation of currency borrowings generated a
charge of GBP10 million, compared with a credit of GBP11 million last year. Loss
on sale of fixed assets and investments was GBP2 million. This compares with a
profit on disposal last year of GBP81 million, due mainly to the sale of our
investment in Qantas.
Tax
The tax rate for the quarter, excluding associates, was 29%. The company expects
to return to a UK taxpaying position this year, and accordingly we anticipate
paying GBP50 million in taxes in the current year.
Earnings Per Share
The earnings attributable to shareholders for the three months was equivalent to
15.3 pence per share, compared with last year's profit per share of 20.6 pence.
For the six month period, the profit attributable to shareholders was GBP261
million, equivalent to 23.7 pence per share, compared with earnings of 24.4
pence per share last year.
The Board has decided that no interim dividend should be paid.
Net Debt / Total Capital Ratio
Borrowings, net of cash and short term loans and deposits, were GBP2,417 million
at September 30, down GBP505 million since the start of the year, partly due to
the conversion of the GBP112 million of bonds from debt to equity. The net debt/
total capital ratio reduced by 13.3 points from March 31 to 54.4%. The net debt/
total capital ratio including operating leases was down 11.3 points from March
31 to 61.1%.
During the quarter we signed two long term secured finance facilities, totalling
$1 billion. One is a committed secured credit facility and the other is a
facility to extend Yen obligations falling due between 2009 and 2011 for a
further five years.
Cash Flow
During the six months we generated a positive cash flow from operating
activities of GBP530 million, GBP46 million higher than last year. Including
current interest bearing deposits, the cash position at September 30, 2005 was
GBP1,925 million, an increase of GBP243 million compared with March 31, 2005.
Aircraft Fleet
During the quarter the group fleet in service increased by 1 to 288 aircraft.
The increase is due to the delivery of an Airbus A321 in the quarter. The next
aircraft delivery is scheduled for November 2007.
Alliance Development
We continue to support the development of the oneworld alliance, both in terms
of customer benefits and membership expansion. The alliance is the first to
offer e-tickets to customers travelling across the networks of the members, thus
providing an enhanced customer experience. In addition, the recent announcement
of Royal Jordanian accepting their invitation to join the alliance is welcomed
and BA is proud to be the lead sponsor for Royal Jordanian in the alliance.
On October 25, Japan Airlines announced their intention to seek oneworld
membership. BA has a long-standing relationship with JAL and we look forward to
welcoming them to the alliance.
Pensions
Like most FTSE 100 companies with defined benefit pension schemes, British
Airways has, as we have previously reported, a significant deficit. As a
consequence, we have launched a major internal communication campaign to inform
staff about the issues. This will continue for several months. In 2006, we will
discuss options to address the issue with the Trustees and unions.
Industrial Relations
As a result of unlawful industrial action by some 1,000 ground support services
staff, we suspended all flights into and out of London Heathrow from 6pm on
August 11, 2005 to 8pm on August 12, 2005. The unlawful action was taken in
support of employees dismissed from the airline's Heathrow catering supplier,
Gate Gourmet. As a consequence of the action, we opened an investigation into
the circumstances of the action taken. The inquiry continues and will establish
the facts of what happened in order to take appropriate action.
The financial consequence of the disruption is estimated at between GBP35 -
GBP45 million. This doesn't have a material impact on the comparators for the
quarter as the company also suffered operational disruption in the same period
last year.
Outlook
Continued capacity restraint by the industry is resulting in a more stable price
environment. This coupled with good demand for premium traffic (in particular
the growth in leisure premium) has delivered a small yield improvement. Assuming
continued stable economies and a rational capacity environment, some yield
improvement is now expected for this financial year. Consequently, revenue is
now expected to grow by between 6% - 7% (up 0.5 points from our previous
guidance).
Despite the improved revenue outlook, market conditions remain broadly unchanged
as significant promotional activity is required to maintain seat factors.
Fuel costs continue to be a challenge for the industry, but our guidance is
unchanged with total fuel costs expected to be up by GBP525 million this year.
As announced in our latest Business Plan, our focus remains on preparing for the
move to Terminal 5 in 2008, investing in products for our customers and
continuing to drive simplification to deliver a competitive cost base.
Note:
Copies of the summary Interim Statement will be issued to all shareholders
through the medium of the British Airways Investor newspaper. Copies of the full
Interim report are available from the company's registered office and on the
Internet at www.bashares.com.
Certain information included in these statements is forward-looking and involves
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 Plan programs, expected future revenues, financing plans
and expected 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 itemize 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. Information on some
factors which could result in material difference to the results is available in
the Company's SEC filings, including, without limitation the Company's Report on
Form 20-F for the year ended March 2005.
The estimated disruption cost reflects the direct cost of the disruption and the
estimated revenue impacts, both direct and indirect. The estimate of GBP35 -
GBP45 million is based on assumptions the company considers reasonable, but are
judgemental.
CONSOLIDATED INCOME STATEMENT (unaudited)
Three months ended Six months ended
September 30 Better/ September 30 Better/
2005 GBPm 2004 GBPm (Worse) 2005 GBPm 2004 GBPm (Worse)
Traffic Revenue
Passenger 1,792 1,705 5.1% 3,482 3,330 4.6%
Cargo 121 118 2.5% 239 236 1.3%
1,913 1,823 4.9% 3,721 3,566 4.3%
Other revenue 292 215 35.8% 543 374 45.2%
TOTAL REVENUE 2,205 2,038 8.2% 4,264 3,940 8.2%
Employee costs 568 550 (3.3)% 1,138 1,091 (4.3)%
Depreciation and amortisation 171 181 5.5% 349 359 2.8%
Aircraft operating lease costs 31 27 (14.8)% 56 53 (5.7)%
Fuel and oil costs 410 271 (51.3)% 765 529 (44.6)%
Engineering and other
aircraft costs 118 115 (2.6)% 235 211 (11.4)%
Landing fees and en route charges 145 145 287 286 (0.3)%
Handling charges, catering and
other operating costs 248 237 (4.6)% 482 470 (2.6)%
Selling costs 106 135 21.5% 214 273 21.6%
Currency differences 2 (8) nm (3) (12) (75.0)%
Accommodation, ground equipment
and IT costs 145 140 (3.6)% 304 306 0.7%
TOTAL EXPENDITURE FROM OPERATIONS 1,944 1,793 (8.4)% 3,827 3,566 (7.3)%
OPERATING PROFIT 261 245 6.5% 437 374 16.8%
Fuel derivative gains* 12 nm 13 nm
Interest expense (54) (68) 20.6% (113) (134) 15.7%
Interest income 22 22 43 40 7.5%
Financing income and expense
relating to pensions (4) (11) 63.6% (8) (22) 63.6%
Retranslation (charges)/credits
on currency borrowings (1) (1) (10) 11 nm
Profit/(loss) on sale of fixed
assets and investments 1 84 (98.8)% (2) 81 nm
Share of profits in associates 4 21 (81.0)% 3 17 (82.4)%
Income relating to fixed asset
investments 1 nm 2 1 100.0%
PROFIT BEFORE TAX 241 293 (17.7)% 365 368 (0.8)%
Tax (70) (68) (2.9)% (104) (100) (4.0)%
PROFIT AFTER TAX 171 225 (24.0)% 261 268 (2.6)%
Attributable to:
Equity holders of the parent 171 225 (24.0)% 261 268 (2.6)%
Minority interest
171 225 (24.0)% 261 268 (2.6)%
Earnings per share:
Basic 15.3 20.6 (25.7)% 23.7 24.4 (2.9)%
Fully diluted 15.2 19.9 (23.6)% 23.1 23.7 (2.5)%
nm: Not meaningful
* Fuel derivative gains reflect the ineffective portion of unrealised gains and
losses on fuel derivative hedges required to be recognised through the income
statement under IAS 39.
CONSOLIDATED BALANCE SHEET (unaudited)
September 30 September 30 March 31
2005 GBPm 2004 GBPm 2005 GBPm
NON-CURRENT ASSETS
Property, plant and equipment
Fleet 6,783 7,026 6,944
Property 970 1,034 1,000
Equipment 372 421 385
8,125 8,481 8,329
Goodwill 72 72 72
Landing rights 119 93 122
Other intangible assets 51 50 60
Investments in associates 115 118 126
Long term investments 29 29 30
Available-for-sale financial assets 4
Employee benefit assets 138 128 137
Other financial assets 117 39 38
TOTAL NON-CURRENT ASSETS 8,770 9,010 8,914
NON-CURRENT ASSETS HELD FOR SALE 1 1 5
CURRENT ASSETS AND RECEIVABLES
Expendable spares and other inventories 92 77 84
Trade receivables 785 729 685
Other current assets 690 330 301
Other current interest bearing deposits 947 1,120 1,134
Cash and cash equivalents 978 790 548
1,925 1,910 1,682
TOTAL CURRENT ASSETS AND RECEIVABLES 3,492 3,046 2,752
TOTAL ASSETS 12,263 12,057 11,671
SHAREHOLDERS' EQUITY AND LIABILITIES
SHAREHOLDERS' EQUITY
Issued share capital 283 271 271
Treasury shares (11) (30) (26)
Other reserves 1,747 835 940
TOTAL SHAREHOLDERS' EQUITY 2,019 1,076 1,185
MINORITY INTEREST 11
TOTAL EQUITY 2,030
Equity minority interest 11 12
Non-equity minority interest 200 200
MINORITY INTERESTS 211 212
PROVISIONS
Employee benefit obligations 1,813 1,839 1,820
Provisions for deferred tax 987 794 816
Other provisions 36 54 34
TOTAL PROVISIONS 2,836 2,687 2,670
NON-CURRENT LIABILITIES
Interest bearing long-term borrowings 3,902 4,544 4,045
Other long term liabilities 334 308 306
TOTAL LONG-TERM LIABILITIES 4,236 4,852 4,351
CURRENT LIABILITIES
Current portion of long-term borrowings 440 540 447
Convertible long-term borrowings 112 112
Trade and other payables 2,659 2,555 2,658
Current tax payable 62 24 36
TOTAL CURRENT LIABILITIES 3,161 3,231 3,253
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 12,263 12,057 11,671
CONSOLIDATED CASHFLOW STATEMENT (unaudited)
Six months ended
September 30 Better/
2005 GBPm 2004 GBPm (Worse)
CASHFLOWS FROM OPERATING ACTIVITIES
Operating profit 437 374 63
Depreciation and amortisation 349 359 (10)
Operating cashflow before working capital changes 786 733 53
(Increase)/decrease in inventories and other receivables (97) (106) 9
(Decrease)/increase in trade and other payables and (31) (14) (17)
provisions
Other non-cash movements 5 4 1
Cash generated from operations 663 617 46
Interest paid (110) (134) 24
Taxation (23) 1 (24)
NET CASHFLOW FROM OPERATING ACTIVITIES 530 484 46
CASHFLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (125) (121) (4)
Purchase of intangible assets (1) (1)
Purchase of interest in associated undertakings (5) (5)
Proceeds from sale of associated undertaking 427 (427)
Proceeds from sale of trade investment 1 1
Proceeds from sale of property, plant and equipment 4 54 (50)
Costs of disposal of subsidiary undertakings (6) (8) 2
Interest received 35 19 16
Dividends received 20 20
Decrease/(increase) in interest bearing deposits 189 (491) 680
NET CASHFLOW FROM INVESTING ACTIVITIES 112 (100) 212
CASHFLOWS FROM FINANCING ACTIVITIES
Repayment of borrowings (28) (65) 37
Payment of finance lease liabilities (190) (549) 359
Exercise of share options 11 11
Distributions made to holders of perpetual securities (7) (7)
NET CASH USED IN FINANCING ACTIVITIES (214) (621) 407
Net increase/(decrease) in cash and cash equivalents 428 (237) 665
Net foreign exchange difference 2 2
Cash and cash equivalents at March 31 548 1,027 (479)
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30 978 790 188
These summary financial statements were approved by the Directors on November 3,
2005.
NOTES TO THE ACCOUNTS (unaudited)
For the period ended September 30, 2005
1 BASIS OF PREPARATION
These summary financial statements have been prepared in accordance with the
recognition and measurement criteria of International Financial Reporting
Standards (IFRS)* issued by the International Accounting Standards Board (IASB)
and with those of the Standing Interpretations issued by the International
Financial Reporting Interpretations Committee (IFRIC) of the IASB with the
exception of the disclosure requirements of IAS 34 - 'Interim Reporting'. The
accounting policies and basis of preparation differ from those set out in the
Report and Accounts for the year ended March 31, 2005 which were prepared in
accordance with United Kingdom accounting standards and the Companies Act 1985
(UK GAAP).
A summary of the significant accounting policies used in the preparation of
these financial statements under IFRS and a summary of the impact of the change
from UK GAAP to IFRS on comparative periods as required by IFRS 1 - 'First-time
adoption of International Financial Reporting Standards' were included in the
group's 'Release of financial information for 2004/05 under International
Financial Reporting Standards' published on July 4, 2005. The release included
the quarterly results for quarters ended June 30, 2004, September 30, 2004,
December 31, 2004 and March 31, 2005 restated under the recognition and
measurement rules of IFRS and a summary of the significant differences to UK
GAAP. The release also included restated balance sheets at those dates in
addition to the restated balance sheet at April 1, 2004, the group's transition
date to IFRS.
As permitted under IFRS 1, the group elected to apply the requirements of IAS 32
- 'Financial Instruments - Disclosure and Presentation' and IAS 39 - 'Financial
Instruments - Recognition and Measurement' from April 1, 2005. As a consequence
certain assets and liabilities are required to be recognised and measured at
fair value. As a result of the application of IAS 39 the opening net assets of
the group increased by GBP183 million at April 1, 2005. The increase represents
the fair value of financial instruments and available for sale financial assets
(GBP193 million, net of deferred tax), partially offset by the impact of the
group's share of the opening reserves adjustments of associated undertakings
(GBP10 million). The adoption of IAS 32 had no impact on the reserves or net
assets of the group except for minor presentational differences between minority
interests and shareholders' equity.
Under IAS 39, financial instruments are recorded initially at fair value.
Subsequent measurement of those instruments at the balance sheet date reflects
the designation of the financial instrument.
Listed investments (other than interests in associates) are designated as
available-for-sale assets and are recorded at fair value. Any change in the fair
value is reported in reserves until the investment is sold when the cumulative
reserves movement is recognised in income. Any provisions for impairment of the
carrying value are reflected in income when they arise. Exchange gains and
losses on monetary items are taken to income unless the item has been designated
as a hedging instrument. Exchange gains and losses on non-monetary investments
are reflected in reserves until the investment is sold when the balance is
recognised in income.
Derivative financial instruments, comprising interest rate swap agreements,
foreign exchange derivatives and fuel hedging derivatives (including options,
swaps and collars) are measured at fair value on the group balance sheet.
Changes in the fair value are reported through operating income or financing
according to the nature of the derivative financial instrument unless the
derivative financial instrument has been designated as a hedge of a highly
probable expected future cashflow. Gains and losses on forward exchange
contracts to hedge capital expenditure commitments are recognised as part of the
total sterling carrying cost of the relevant tangible asset as the contracts
mature or are closed out. Gains and losses on derivative financial instruments
designated as hedging instruments that are expected to be highly effective at
inception and were highly effective for the period are taken to reserves and
reflected in the income statement when the cashflow either occurs or ceases to
be highly probable.
Certain loan repayment instalments denominated in US dollars and Japanese yen
are designated as hedges of highly probable future foreign currency revenues.
Exchange differences arising from the translation of these loan repayment
instalments are taken to reserves until the future revenue occurs when the
cumulative exchange difference is recognised in income.
The hedging relationships are tested for effectiveness in accordance with IAS 39
- 'Financial Instruments'.
Long term borrowings, finance leases and hire purchase agreements are recorded
at amortised cost. Certain leases contain interest rate swaps that are closely
related to the underlying financing and, as such, are not accounted for as an
embedded derivative. The carrying value of the interest rate swap is reflected
within the carrying value of the long term borrowing.
The financial information presented has been prepared on the basis of those
Standards and Interpretations of the International Financial Reporting
Interpretations Committee (IFRIC)
NOTES TO THE ACCOUNTS (unaudited) (Continued)
For the period ended September 30, 2005
BASIS OF PREPARATION (continued)
and Standard Interpretations Committee (SIC) that are expected to be applicable
to 2005/06 financial reporting. These are subject to ongoing review and
endorsement by the European Commission, whilst the application of the Standards
continues to be subject to interpretation by IFRIC as well as emerging industry
consensus. As a consequence, further adjustments to the accounting policies and
treatments may need to be made in the first complete set of IFRS financial
statements for 2005/06 for the year ending March 31, 2006.
These financial statements have been prepared on a historical cost convention
except for certain financial assets and liabilities, including derivative
financial instruments and available-for-sale financial assets, that are measured
at fair value. The carrying value of recognised assets and liabilities that are
hedged are adjusted to record changes in thefair values attributable to the
risks that are being hedged.
* For the purposes of these statements IFRS also include International
Accounting Standards (IAS).
2 FINANCE COSTS / INCOME
Three months ended Six months ended
September 30 September 30
2005 GBPm 2004 GBPm 2005 GBPm 2004 GBPm
FINANCE COSTS
Interest payable on bank and other loans and
finance charges payable under finance leases and
hire purchase contracts 54 68 113 134
Interest capitalised
Total finance costs 54 68 113 134
FINANCE INCOME
Bank interest receivable 22 22 43 40
Total finance income 22 22 43 40
FINANCING INCOME AND EXPENSE RELATING TO PENSIONS
Net financing expense/(income) relating to 4 11 8 22
pensions
Amortisation of actuarial (gains)/losses on
pensions
Total financing income and expense relating to 4 11 8 22
pensions
Retranslation (charges)/credits on currency (1) (1) (10) 11
borrowings
3 PROFIT/(LOSS) ON SALE OF FIXED ASSETS AND INVESTMENTS
Three months ended Six months ended
September 30 September 30
2005 GBPm 2004 GBPm 2005 GBPm 2004 GBPm
Net profit on disposal of investment in Qantas 86 86
Net profit/(loss) on the disposal of property,
plant and equipment 1 (2) (2) (5)
1 84 (2) 81
4 TAX
The tax charge for the quarter is GBP70 million of which GBP42 million
represents deferred tax in the UK, GBP25 million current UK tax and GBP3 million
overseas tax.
5 EARNINGS/(LOSS) PER SHARE
Basic earnings per share for the quarter ended September 30, 2005 are calculated
on a weighted average of 1,123,454,000 ordinary shares (September 2004:
1,070,471,000; March 2005: 1,071,126,000) as adjusted for shares held for the
purposes of employee share ownership plans including the Long Term Incentive
Plan. Diluted earnings per share for the quarter ended September 30, 2005 are
calculated on a weighted average of 1,131,566,000 ordinary shares (September
2004: 1,118,470,000; March 2005: 1,126,485,000).
The number of shares in issue at September 30, 2005 was 1,130,882,000 (September
30, 2004: 1,082,903,000; March 31, 2005: 1,082,903,000) ordinary shares of 25
pence each.
NOTES TO THE ACCOUNTS (unaudited) (Continued)
For the period ended September 30, 2005
6 RECONCILIATION OF MOVEMENT IN NET DEBT TO CHANGES IN CASH FLOWS
Six months ended
September 30
2005 GBPm 2004 GBPm
Increase/(decrease) in cash and cash equivalents during the period 428 (237)
Net cash used in repayment of long-term borrowings 218 614
(Reduction)/increase in interest bearing deposits (189) 491
Change in net debt resulting from cash flows 457 868
New finance leases taken out and hire
purchase arrangements made (5) (7)
Conversion of Convertible Capital Bonds 2005 112
Exchange movements (59) 11
Movement in net debt during the period 505 872
Net debt at April 1 (2,922) (4,158)
Net debt at period end (2,417) (3,286)
Net debt comprises the current and non-current portions of long-term borrowings,
convertible long-term borrowings and overdrafts, less cash and cash equivalents
plus interest-bearing short-term deposits.
7 ANALYSIS OF LONG-TERM BORROWINGS
September 30 September 30 March 31
2005 GBPm 2004 GBPm 2005 GBPm
Interest bearing long-term borrowings comprise:
Loans 1,090 1,037 1,105
Finance Leases 1,471 1,892 1,493
Hire purchase arrangements 1,341 1,615 1,447
3,902 4,544 4,045
Current portion of long-term borrowings comprise:
Loans 61 125 63
Finance Leases 103 118 96
Hire purchase arrangements 276 297 288
440 540 447
8 RESERVES
September 30 September 30 March 31
2005 GBPm 2004 GBPm 2005 GBPm
Balance at April 1 940 557 557
Transitional effects from the adoption of IAS 39 and IAS 383
32
Profit for the period 261 268 392
Distributions to perpetual preferred security holders (7) (7) (14)
Conversion of Convertible Capital Bonds 2005 100
Exchange and other movements 70 17 5
1,747 835 940
9 The figures for the three months and six months ended September 30, 2005 and
2004 are unaudited and do not constitute full accounts within the meaning of
Section 240 of the Companies Act 1985. The financial statements for the year
ended March 31, 2005 have been delivered to the Registrar of Companies and on
which the auditors have issued an unqualified audit report and did not contain a
statement under Section 237 of the Companies Act 1985.
INDEPENDENT REVIEW REPORT TO BRITISH AIRWAYS Plc
Introduction
We have been instructed by the Company to review the financial information for
the three months and six months ended September 30, 2005, which comprises the
Consolidated Income Statement, Consolidated Balance Sheet, Consolidated Cash
Flow Statement and Notes to the Accounts. We have read the other information
contained in the interim results and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
This report is made solely to the Company in accordance with guidance contained
in Bulletin 1999/4 'Review of Interim Financial Information' issued by the
Auditing Practices Board. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company, for our work,
for this report, or for the conclusions we have formed.
Directors' responsibilities
The interim results, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority.
As disclosed in note 1, the next annual financial statements of the Group will
be prepared in accordance with those IFRSs adopted for use by the European
Union.
The accounting policies are consistent with those that the directors intend to
use in the next financial statements. There is, however, a possibility that the
directors may determine that some changes to these policies are necessary when
preparing the full annual financial statements for the first time in accordance
with those IFRS adopted for use by the European Union.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of interim financial information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making enquiries
of Group management and applying analytical procedures to the financial
information and underlying financial data, and based thereon, assessing whether
the accounting policies have been applied. A review excludes audit procedures
such as tests of controls and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit performed in
accordance with International Standards on Auditing (UK and Ireland) and
therefore provides a lower level of assurance than an audit.
Accordingly we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the three months
and six months ended September 30, 2005.
Ernst & Young LLP
London
November 3, 2005
UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) INFORMATION
(unaudited and for information only)
The accounts have been prepared in accordance with the measurement and
recognition requirements of International Financial Reporting Standards (IFRS)
which differ in certain respects from those generally accepted in the United
States.
The comparatives have been restated to recognise the adoption of IFRS by the
group.
The adjusted net income and shareholders' equity applying US GAAP are set out
below:
Three months ended Six months ended
September 30 September 30
2005 GBPm 2004 GBPm 2005 GBPm 2004 GBPm
Profit for the period as reported in the
Group profit and loss account 171 225 261 268
US GAAP adjustments (68) (40) (127) (25)
Net income as so adjusted to
accord with US GAAP 103 185 134 243
Net income per Ordinary Share
as so adjusted
Basic 9.2p 17.3p 12.1p 22.7p
Diluted 9.1p 16.7p 11.8p 21.1p
Net income per American Depositary Share
as so adjusted
Basic 92p 173p 121p 227p
Diluted 91p 167p 118p 221p
September 30 March 31
2005 GBPm 2004 GBPm 2005 GBPm
Shareholders' equity and minority interests
as reported in the Group balance sheet 2,030 1,287 1,397
US GAAP adjustments 478 975 766
Shareholders' equity and minority interests
as so adjusted to accord with US GAAP 2,508 2,262 2,163
AIRCRAFT FLEET
(unaudited and for information only)
Number in service with Group companies at September 30, 2005
On Balance Sheet Off Balance Total Changes Since Future Options
aircraft Sheet Aircraft September 2005 June 2005 deliveries
AIRLINE OPERATIONS (Note 1)
Boeing 747-400 57 57
Boeing 777 40 3 43
Boeing 767-300 21 21
Boeing 757-200 13 13
Airbus A319 (Note 2) 21 12 33 3 40
Airbus A320 (Note 3) 9 17 26 3
Airbus A321 7 7 1
Boeing 737-300 5 5
Boeing 737-400 (Note 4) 18 18
Boeing 737-500 9 9
Turboprops (Note 5) 8 8
Embraer RJ145 16 12 28
Avro RJ100 16 16
British Aerospace 146 4 4
GROUP TOTAL 206 82 288 1 6 40
Notes:
1. Includes those operated by British Airways Plc and British Airways
CitiExpress Ltd.
2. Certain future deliveries and options include reserved delivery positions,
and may be taken as any A320 family aircraft.
3. Excludes 1 Airbus A320 sub-leased to GB Airways.
4. Excludes 2 Boeing 737-400s sub-leased to Air One.
5. Comprises 8 de Havilland Canada DHC-8s. Excludes 2 British Aerospace ATPs
stood down pending return to lessor and 12 Jetstream 41s sub-leased to
Eastern Airways.