Embattled British Airways chief executive Willie Walsh has declined his annual bonus for the second year in succession as the airline battles mounting financial losses.

The flag-carrier reported a record loss of some £531 million for financial 2009/10, as a contraction in business travel took a toll on revenue.

The loss was significantly larger than the figure of £401 million reported the previous year and represents the biggest loss since the airline was privatised in 1987.

Disruption caused by the volcanic ash cloud which swept over Europe in April also cost the airline over £100 million. Flights were grounded across the continent for six days, with thousands of passengers unable to fly as a result.

An ongoing dispute with the Unite trade union has also proved costly, with cabin crew at British Airways walking out for a total of 22 days in 2010.

Following the completion of the latest round of strikes, Unite has confirmed it will ballot members over the prospect of further action later in the year.

However, there has also been positive news for the carrier, with a merger with Iberia set for completion at the end of the year.

Current Climate

Amid this climate Mr Walsh had decided declining his bonus “was the most appropriate thing to do”. The chief executive took a similar step in 2009, turning down more than £500,000-worth of share options.

Facing the threat of renewed strike action Mr Walsh said: “I regret we found ourselves at loggerheads with very valued members of staff at a critical time.

“Without change, British Airways will just shrink and shrink and shrink.

“Because of the legacy structures we have in this business, we are increasingly unable to serve some popular destinations in our network profitably.

“We need profitable growth to make this business sustainable.”

However, predictably, the gesture met with little gratitude at Unite.

Len McCluskey warned of “uproar” if Mr Walsh had taken a bonus this year.

“His plans for BA have seen it become a byword for bullying, have driven customers into the arms of competitors, poisoned working relations and is denying the airline a peaceful, stable future,” stated Mr McCluskey.

“This is not success; it is ruination of a great British company.”

While forgoing his bonus, Mr Walsh retains his £735,000-per-year salary, which has remained at the same level since 2008.