Summary of the headline figures
Premium traffic rose by 11.7 per cent in February, representing the 8th consecutive month of growth over last year.

In line with BA strategy, underlying ASK growth showed only a marginal increase, despite strong growth in headline capacity due to the 29th day this February. Premium traffic performed strongly, with underlying non-premium traffic falling. Premium traffic rose by 11.7 per cent, or 7.8 per cent underlying, with all brands performing strongly. Headline non-premium traffic rose by 1.9per cent, but fell by 1.6 per cent on an underlying basis.

British Airways mainline scheduled Available Seat Kilometres (ASKs) in February were 4 per cent higher than February 1999. Without an additional day in February, ASKs would have risen by around 0.4 per cent. Traffic, measured in Revenue Passenger Kilometres (RPKs), was 3.4 per cent higher. On an underlying basis, RPKs fell by 0.1 per cent. Passenger load factor for February was 0.3 points lower than last year at 64.5 per cent. Cargo tonne kilometres rose by 13.6 per cent.

Market conditions
While overcapacity continues in some markets, premium traffic continues to recover strongly, and the beneficial effect on yield of a higher mix of premium passengers seen in the December quarter continues.

Costs
While in the short term unit costs will rise due to fuel prices net of hedging, product spend and wider use of smaller aircraft, these factors will be mitigated by our nine profit initiatives. At the annual Investor Day, British Airways revealed that the average oil price at which the group is hedged for the next financial year is around $19.75/bbl. Given hedging of around 60 per cent currently in place for the year, and if today’s forward market were taken to represent the market`s assessment of future fuel prices, fuel costs will amount to an additional £160 million on top of current year`s costs. Details on the nine profit initiatives were also announced. These initiatives cover productivity, cost of sale, product specification, Gatwick, domestic operations, subsidiaries, aircraft utilisation, procurement and e-business. They will help to deliver the target of 10 per cent operating margin by 2003.

Strategic developments
British Airways announced its comprehensive e-business strategy, which comprises four activities; these are e-Commerce, e-Working, e-Procurement and e-Ventures.

Significant developments are taking place in e-Commerce, where core commercial activities of sales, marketing and customer service can be generated on-line. e-Procurement will take full advantage of the latest, internet-based buying techniques, including auction-style tendering. The target is to increase the level of on-line purchasing in the UK from the current 25 per cent to 80 per cent by March 2002, saving more than £175 million on the airline’s current £3.7 billion a year purchasing spend. e-Working will transform the way the company carries out its business internally.

e-Ventures includes three major new on-line ventures, in which up to £100 million of investment is planned over the next two years. The new businesses will include an on-line travel agency offering customers a one-stop-shop for flights, hotels, car hire and other travel services, and a significant expansion of the on-line activities of Air Miles, our wholly owned subsidiary.

British Airways and Qantas announced the introduction of new services between the UK and Australia. Together, the airlines’ will offer four daily services between London and Sydney. Qantas will also add a second daily service between Melbourne and London. Frequencies between Singapore and Perth will rise to 18 per week, with Singapore-Brisbane frequencies rising to 11 per week. These legs will be operated by Qantas 767s, and will offer more connections to London via Singapore. To support the new schedules, Qantas will lease seven Boeing 767s, released as a result of the new British Airways fleet strategy.

The oneworld alliance marked its first anniversary by announcing the formation of a central management team to drive future growth and the launch of new customer services and benefits. It will be led by Peter Buecking, who will be stepping down from his current role as Sales and Marketing Director with Cathay Pacific Airways. As oneworld Managing Partner, he will report to the alliance’s Governing Board, comprising the Chief Executives of each of the member airlines.

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