British Airways mainline scheduled revenue passenger kilometres (RPKs) grew by 8.5 per cent. Intercontinental traffic was up 9.4 per cent and outstripped the 4.7 per cent growth in UK/Europe traffic. Premium traffic in the month grew by 1.2 per cent whilst non-premium traffic was 10 per cent higher. Within premium travel, Club World was again the best performer. Traffic in the Club Europe cabin declined.
Traffic performance, particularly in the premium cabin, was helped by the 10-day sick-out amongst pilots at American Airlines during the month.
Mainline scheduled available seat kilometres (ASKs) were up 9.7 per cent resulting in a 0.7 point reduction in the passenger load factor to 64.8 per cent.
Cargo tonne kilometres in the month grew by 1.9 per cent leading to a 2.2 point decline in the overall load factor for mainline scheduled services to 63.2 per cent.
Highlights of the month
British Airways announced the following during its Investor Day :
1) Further reduction in capacity growth plans with ASK growth in 1999/00 now planned to be no more than 0.6 per cent, two per cent in 2000/01 and reductions of two to three per cent in each of the next three years.
2) Disposal of 29.5 per cent of its investment in Equant N.V. for a profit of £49 million. The airline continues to retain a beneficial interest in some 3 million Equant shares which are listed on the New York and Paris Stock Exchanges.
3) A five-year agreement reached with the UK tax authorities that 50 per cent of the cost of an aircraft should qualify for 25 per cent capital allowances with the remaining 50 per cent attracting a lower rate of six per cent. The agreement follows the UK budget of November 1996 which proposed a reduction in the level of capital allowances for all `long life assets` from the existing 25 per cent to a lower rate of only six per cent.
4) A target to double the operating margin of the group within the next five years. Plans to achieve this include the new fleet strategy which is expected to improve margins by 1.5 points.
The results of the Balpa (The British Air Lines Pilots Association) ballot was announced. 1851 members voted in favour of the proposed agreement covering a number of issues including the flight crew aspect of the airline`s Business Efficiency Programme (BEP), with only 436 voting against.
British Airways announced that it would not be renewing the Performance Reward System for UK Travel Agents after its expiration at the end of March. The airline`s commission rate will be a flat seven per cent for all tickets sold through UK travel agents.
In the USA, the airline reduced commission rates to five percent for Club and three percent for Concorde and First, representing a two percentage point reduction from previous levels. Agent compensation for sales of World Traveller tickets remains at ten per cent.
British Airways confirmed that it is to take a nine per cent stake in Iberia. American Airlines also confirmed that it will take a one per cent holding in Iberia. The expected price of British Airways` investment will be around £200 million with a maximum of £215 million. The final price will depend on a number of adjustments including the eventual value of Iberia`s 29 per cent interest in Amadeus which is planning an Initial Public Offering, and the price achieved by Iberia on privatisation.
British Airways will be Iberia`s sole key industrial partner and will have the right to appoint two directors to Iberia`s 12 person board as well representation on all Board sub-committees. In addition, other major Spanish institutional investors with whom British Airways intends to complete shareholder agreements before the transaction is finalised, will hold a further 30 per cent of the shares in Iberia and appoint a further three members to its board.
British Airways and Iberia have also signed a commercial agreement under which they plan to co-operate in a wide area of activities, including code-sharing on flights beyond the UK and Spain, reciprocal participation in frequent flyer programmes, and common ground handling and cargo.
Iberia was welcomed as the seventh member of the oneworld? alliance.