the way we run our business - british airways · the way we run our business ... finance and...

To create a really high-performingbusiness we need to build aninspiring and rewarding workplacewhere talented people can work tothe best of their ability to meet ourcustomers’ needs and our widersocial responsibility.

The way we run our business

34 / British Airways 2008/09 Annual Report and Accounts

Corporate governance

Financial statements

British Airways 2008/09 Annual Report and Accounts / 35

We are re-inventing the way we work atBritish Airways. We are creating a leanerorganisation with a distinctive, high-performing culture through our flagshipchange programme, Compete 2012.

Over the next three years this programme,described in detail on page 28, will help us to achieve our vision of becoming theworld’s leading global premium airline.

It will affect the way we interact with each other, how we measure individualperformance and how we promote,develop and reward talent. Coupled withour commitment to be a responsibleairline, it will also help us achieve ourambitious environmental targets, put ourrelationship with key suppliers on a newfooting and continue our tradition ofsupporting communities in useful andimaginative ways.

Restructuring managementWhile Compete 2012 is a long-termchange programme, current marketconditions have made it imperative to move fast to create a leaner, more agile structure starting at the very top of our business.

In December 2008, a third of ourmanagers left the business under avoluntary severance scheme. At the sametime we redesigned the organisation topromote greater customer focus andbetter governance and leadership.

This restructuring effort has made us moreefficient. It has also helped us identify anddraw on new talent in the business, helpedby the fact that we are now encouragingmore people to move between functionsto gain wider experience and find newoutlets for their skills. To support greater

Overview

Our business

The way we run our businessThe workplace

CustomerSilla Maizey

EngineeringGarry Copeland

Finance and performance Keith Williams

People and organisational effectiveness

Tony McCarthy

Sales and marketingAndrew Crawley

Strategy and business unitsRobert Boyle

CommunicationsJulia Simpson

CustomerSilla Maizey

EngineeringGarry Copeland

Flight operationsStephen Riley

OperationsAndy Lord

InvestmentsRoger Maynard

Legal and governmentand industry affairsMaria Da Cunha

Safety and securityTim Steeds

Chief ExecutiveWillie Walsh

Customer andOperations Executive

ManagementBoard

Reporting to the Chief Executive


The way we run our businessThe workplace continued

mobility, we have clarified individual andcollective roles and responsibilities andnow publish accountabilities for all of ourtop managers on our intranet.

Leadership developmentWe need great leaders to help us contendwith current trading conditions and achieveour long-term vision. A leading globalpremium airline must be bold and highlyeffective in developing present andpotential leaders.

This is why we introduced our HighPerformance Leadership (HPL) systemduring the year. This is an integratedsystem, linking business strategy, objectivesetting, performance assessment,development and reward. Focused initiallyon the senior leaders, HPL has rigorousassessment mechanisms to identifytalented leaders and to provide them with the right tools and support tocontinue developing.

We have also defined, communicated andbegun to measure individual performanceagainst three capabilities we think we need in our leaders, in addition tooperational excellence:

• Communicating a common vision;

• Agreeing accountabilities; and

• Motivating and inspiring others.

For each capability, specific behaviourshave been developed so that leadersunderstand exactly what is expected ofthem and we are supporting them with a range of development programmes,including executive coaching, networks,forums and external courses. We are also using new techniques to measureperformance. These will allow us tomonitor individual progress and track ourown overall success at managing talent.

Among the other leadership initiatives we launched were:

• Behaviours for Success – a leadershipdevelopment programme for the HPLcommunity, focusing on understandingand developing personal leadershipperformance;

• Leadership Matters – a scheme toidentify and develop leaders who havepivotal roles in the Customer andOperations areas of our business; and

• A Leadership Development Portfoliothat will be introduced this year with theaim of supporting current and potentialleaders at every level of the business,including emerging leaders, those on afast track to senior positions and thosewith strategic roles at the very top of our organisation.

The management of our businessChange must start at the top and duringthe year we reorganised our topmanagement team, comprising ninedirectorate heads, led by the ChiefExecutive. It is now split into two groups –the Management Board and the Customerand Operations Executive.

The Management Board, which meetsweekly, is responsible for the vision andstrategic direction of the Company.

The Customer and Operations Executiveis accountable for day-to-day customerservice, operational performance andensuring the highest standards of safety.This group also meets weekly.

Legal, director of safety and security anddirector of investments also report to theChief Executive.

“Change must start at the top and during the year we reorganised our top management team, comprising ninedirectorate heads, led by the Chief Executive.”




Overview

Our business

Our restructuring effort has made us more efficient. It has alsohelped us identify and draw on new talent in the business, helped by the fact that we are now encouraging more people to movebetween functions to gain wider experience and find new outletsfor their skills. To support greater mobility, we have clarifiedindividual and collective roles and responsibilities and now publishaccountabilities for all of our top managers on our intranet.



People and organisationaleffectivenessIn transforming the way we work, weremain focused on creating a diverse,challenging and rewarding workplacewhich people across the airline can feelproud to be a part of, despite ourexpectation that the number of peopleemployed will need to reduce as we seekto streamline our business.

HeadcountAs at March 31, 2009, we employed40,627 MPE.

Average attrition remains low at 7 percent, with the exception of managementgrades where a voluntary redundancyprogramme contributed to a significantincrease in attrition for this group.

RewardWe operate two principal funded definedbenefit pension schemes in the UK, theAirways Pension Scheme (APS) and theNew Airways Pension Scheme (NAPS).Both are closed to new members. FromApril 1, 2003, new employees wereentitled to join the British AirwaysRetirement Plan (BARP).

SmartPension arrangements, which allowour UK-based employees to make theirpension contributions in a more tax-efficient way, were introduced in early2008. Around 90 per cent of those eligibleare now benefiting from this arrangement.

Since 2005 our Employee Reward Plan(ERP) has allowed non-managementemployees to share in the success of thebusiness based on the achievement ofcorporate measures and targets. However,

due to our losses in the year, the schemedid not operate in 2008/09.

Instead we used local incentive plans tooffer rewards for improved performance,assessed against a range of operational,customer and financial measures. The first plan was introduced in Terminal 5 and has led to significant improvements inperformance, with targets being exceededfrequently. This approach is now beingconsidered in other areas to drivecontinuous improvement in ourperformance across the business.

Management bonus schemes, using a mixof financial and non-financial performancemetrics, are designed to improve overallperformance and to reward individualeffort. Given the deterioration in tradingconditions during the year, no bonuses will be paid.

However, we have replaced our grade-based reward scheme for managers with anew broad band system which links rewardsmore closely to individual performanceand capability. Separately, our Bravorecognition scheme allows us to recognisepeople across our business for their effortsand achievements.

DiversityWe are proud to be a business thatwelcomes and nurtures difference.Diversity and inclusion are a way of life for us.

Our diversity initiatives are all aboutdignity and respect. They are designed to promote good relationships betweencolleagues, irrespective of their background,religion or culture. As part of our annualdiversity week, a series of events was heldto raise awareness and promote a more

Total membersMarch 31, 2009 APS NAPS BARP

Active members 1,494 28,130 6,770Pensioners in payment 19,266 15,699Dependent pensioners 7,301 2,756Deferred pensioners 3,143 22,307 584

31,204 68,892 7,354

“Given the deterioration intrading conditions duringthe year, no bonuses will be paid.”

Airline operationsMPE reduction(average)

0.7%Employee costs(excludingrestructuring)

£2,193m




Overview

Our business

We are proud to be a business that welcomes and nurtures difference.Diversity and inclusion are a way of life for us.

Our diversity initiatives are all about dignity and respect. They are designedto promote good relationships between colleagues, irrespective of theirbackground, religion or culture. As part of our annual diversity week, a seriesof events were held to raise awareness and promote a more positive andproductive work environment.



positive and productive work environment.These included an inter-faith paneldiscussion focusing on five key religions anda presentation from a member of the Boardof the British Paralympic Association.

The focus this year has been ondeveloping our Dignity at Work strategy to reduce harassment and bullying in theworkplace. We have appointed and trainedHarassment Advisors, drawn from acrossthe business, in response to colleagues’requests for people they can approachconfidentially about any issues they mayhave. The advisors act as a listening earand provide practical advice and guidance.Our intention is to adopt a more informalapproach to resolving potential conflictsusing internal mediators.

As a responsible company, we takedisability very seriously. We welcomeapplications from people with disabilitiesas we aim to employ the most talentedpeople and we support individuals withdisabilities in reaching their full potential bymaking reasonable adjustments for themin the workplace.

We consult with our disabled employeegroup to identify disability issues and theyhelp us to ensure that we are making allour products, services and training fullyinclusive and accessible. All frontlineemployees are trained in disabilityawareness to increase their knowledgeabout disabled customers and employees.

We introduced a Building Ability strategyto identify and promote the needs ofdisabled customers and colleagues. Weconstantly look at how we can improve thejourney experience for disabled customersand for the first time we conductedspecific customer research to identifyareas for development. In July 2008, 522 members of the British ParalympicsAssociation travelled to Beijing for theParalympic Games, providing us withimportant lessons we can translate intoday-to-day practice.

Overall, our Dignity at Work strategyinvolves training, communications and

workshops across the business. Alldepartments have targets to achieve andall employees must now complete theonline ‘Expect Respect’ training course,introduced during the year.

AbsenceWe saw a modest improvement inattendance throughout the year. Theheadline annual absence level hasimproved by one day per person. AtDecember 2008 it stood at 10.8 averagedays per person per annum, with someareas of the business meeting top quartileabsence levels. While there has been amodest improvement overall this year, we still compare unfavourably with similarsized businesses in the UK. To remedy thiswe are creating a new programme to helpmanagers deal with attendance issues.

Absences – days per person per annum

December 2008 10.8

January 2008 11.7

2003 baseline 16.7

Employee relationsWe negotiate with a total of three tradeunions representing colleagues across thebusiness. We seek to work constructivelywith colleagues and their representativesto improve productivity and performance.

Despite the challenges we faced in theearly days of Terminal 5, we went onduring the year to achieve significantimprovements in our operationalperformance. This was partly down to theagreements we reached for new workingpractices at the terminal. A major featureof these agreements was direct colleagueengagement with the involvement of ourrecognised trade unions. Another keyaspect was the introduction of localincentive plans for many terminal-basedjobs as discussed above.

We continue to work hard to foster good relations with the representatives of our flying community. Theserelationships will remain key as we tackle the challenges ahead.

Total employees

Men 54%Women 46%

Senior managers

Men 74%Women 26%

Managers

Men 69%Women 31%

Overview

Our business




We carried out consultations with anumber of groups within the business tosee where we could improve efficiencyand this has led to some beneficialchanges in work practices and roles. Theareas affected by restructuring included:

• Customer relations;

• Gatwick ramp and customer services;

• British Airways World Cargo;

• Glasgow cabin crew base; and

• Manchester engineering base.

During the year we fundamentally changedthe way we organise our human resources(HR) management. We introduced HRBusiness Partners who now focus on goodpeople management and employeerelations and are responsible for day-to-day industrial relations matters. The centralindustrial relations team was consequentlyscaled back and given a more strategicrole. To support this change we ran anumber of bespoke industrial relationstraining courses to improve understandingand practice.

Engaging our colleagues We ensure that colleagues are kept wellinformed about our Company, customersand industry by using comprehensiveinternal communications. Face-to-facecommunication is our priority and we runregular briefings across the Company sothat as many people as possible can meet,question and share ideas with senior andline managers. We run workshops tosupport managers in communicating keyannouncements and also online forumsand an online Ideas Exchange toencourage wider dialogue. Othercommunication channels include apersonalised intranet, mobile SMSmessaging, video and a range ofCompany-wide and local newsletters.

In 2008/09 we saw a sea change in theway people within our business think aboutworking here. Our Speak Up! attitudesurvey in the autumn of 2008 recordedsignificant improvements in scores forpride, service and product advocacy, and satisfaction with basic conditions.

The results reflect the positive waycolleagues feel about our move toTerminal 5 and our improved performance.Encouragingly, the number of peopleresponding to the survey rose too,

indicating that more employees regard this as an important means of expressingtheir opinions.

To make the survey more effective, we wantto ensure that changes are implemented asa result. All managers are now being given aclear responsibility to plan actions basedon survey findings in an open andtransparent way. Next year we will run thesurvey more frequently during the year, so that managers get regular feedback onchanges in colleague opinion.

2009/10 will also see the launch of anEngagement Index. Building on Speak Up!results, this will help identify howmanagers can increase levels ofengagement within their teams.

Employment tribunalsDuring 2008/09, the Group was servedwith 74 new proceedings in employmenttribunals. British Airways Plc was therespondent in all but three of theproceedings. The other three are againstBA Avionic Engineering, CityFlyer and BA Maintenance Cardiff. This remains alow figure given our relative size. Of the 74 proceedings:

• We lost no tribunal claims in the year;

• We did lose a preliminary hearing,currently being appealed, concerning therights of staff employed and resident inHong Kong to pursue discriminationclaims in the UK;

• Six claims involved multiple claimants,including two, on how holiday pay shouldbe calculated under Civil Aviation(Working Time) Regulations, brought onbehalf of some 13,000 pilots and cabincrew members;

• Claims including a discrimination elementoutnumbered those for unfair dismissalfor the second year. There were 19 unfairdismissal claims, about the same as in2007/08; and

• A total of 47 claims for discrimination ordiscrimination and other matters werelodged, a 60 per cent increase on the year before. Of these, 31 are ongoing, 12 were settled and four withdrawn, won by British Airways or struck out.

“We negotiate with a total of three trade unions representingcolleagues across thebusiness. We seek to work constructively with colleagues and their representatives to improve productivity and performance.”


The way we run our businessThe marketplace

CustomersOur customers are at the heart ofeverything we do. Our overriding aim is to make sure we offer an upgraded serviceto everyone who chooses to fly with us.

We talk constantly to large numbers ofcustomers to get a real understanding of their needs, each month surveyingaround 57,000 of them through our global performance feedback survey.

By doing this we get a close and accuratereading of how our customers’ needs arechanging and we are able to constantlyimprove their travelling experience. This isvital for us to to secure our position as theworld’s leading global premium airline.

Service and trainingOur people play a crucial role in providingthe upgraded travel experience. We arecommitted to excellent service and areinvesting heavily in training customer-facing colleagues. Putting the customer at the heart of everything we do is also akey priority of our Compete 2012 changeprogramme, described in detail on page 28.

These training programmes will continue in 2009, supplemented by service styletraining for our ground team at Heathrowand coaching for people in our contactcentres in how to provide a more attentiveand personal service.

Following the introduction of new corporatevalues last year, all training programmeshave been redesigned. The behaviours are woven into all our courses to ensurecolleagues, particularly those in customer-facing roles, meet our high standards.

During the year we delivered over215,000 days of training. This includedtraining days for cabin crew to enable themto deliver the highest level of premiumservice to our customers, and for groundstaff to support the continued phasedmoves to Terminals 5 and 3 at Heathrow.

Ground experienceTerminal 5 continues to impress ourcustomers. They are enjoying improved

punctuality, shorter check-in times and analtogether smoother travelling experience.

Around 21 million customers used theterminal during the year and customersatisfaction has increased noticeably sinceopening. In direct response to customerfeedback, we have further improved theexperience since opening, for instance by introducing a dedicated premiumcheck-in zone.

The luxurious lounge complex at Terminal 5has also been exceptionally well received,with an increase of over 20 percentagepoints in customer satisfaction. The newlounges offer greatly improved facilities,including wine bars, spa treatments, deliciousfood and upgraded communication links.We are now introducing similarly themedlounges across our network.

Onboard experienceThe new Club World cabin layout wasintroduced on our Boeing 747 aircraft in2007/08 and the roll-out was completedlast year. Combining new levels of comfort,greater privacy and choice, the layout has achieved an increase in customersatisfaction, of over 20 percentage points.We are now rolling out the new cabin on our Boeing 777 aircraft.

Later this year we will introduce a new First cabin and the new aircraft we have on order will allow us to introduce furtherinnovations including new seating in WorldTraveller Plus and World Traveller. Our newLondon City to New York JFK service willuse Airbus A318 aircraft in an all-premium,32-seat layout. This service is the firstnorth Atlantic service from London Cityairport, and it will offer customers fullmobile text and data services.

The new on-demand in-flight entertainmentsystem has also been well received.Customers like the increased flexibility and the wider choice of movies, TVprogrammes, audio and interactive games.

We have improved the onboardexperience for our premium shorthaulcustomers, offering them greater space

“Later this year we willintroduce a new First cabin and the new aircraftwe have on order will allowus to introduce furtherinnovations including newseating in World TravellerPlus and World Traveller.”




Overview

Our business

Terminal 5 continues to impress our customers. They areenjoying improved punctuality, shorter check-in times and an altogether smoother travelling experience.

Around 21 million customers used the terminal during the year and customer satisfaction has increased noticeably sinceopening. In direct response to customer feedback, we havefurther improved the experience since opening, for instance by introducing a dedicated premium check-in zone.

Average paymentperformance

91%of payments were on time inthe UK.


The way we run our businessThe marketplace continued

and privacy by keeping the middle seatfree. Also, we have not forgotten ouryoungest passengers who can now enjoyan entertainment pack on longhaul flightsfeaturing that much-loved character,Paddington Bear.

ba.comba.com – our online portal – is not onlybecoming more popular with customers, it is also helping us to drive down costsand increase revenues.

Almost a third of all our bookings are nowmade on ba.com, with almost half of allEuropean leisure fares sold via the UK site.This year we introduced a new featureallowing customers to upgrade theirbooking at any time between buying aticket and checking-in online.

A large number of our passengers nowcheck-in online. They clearly enjoy theconvenience of this service. For thatreason we have now launched a popularnew service, allowing customers to check-in or access real time arrivals and departures information through their mobiles.

During a recent survey, two thirds ofrespondents rated ba.com as Excellent or Very Good – which is proof that ourcreative development of the website isproviding real value to our customers.

CargoBA World Cargo continues to focus on providing premium products. We have improved the ‘Prioritise’ (express)service through advancements in the new ‘cool chain’ technology. New services such as scanning for airmail and directairport-to-door deliveries are just some of the improved solutions we are nowoffering shippers.

BA World Cargo also continues to play aleading role in simplifying the internationalsupply chain. We are fully committed tothe IATA coordinated e-freight initiative.Not only have we played an important rolein formulating guidance for participatingairlines, we were also the first European

carrier to use e-freight between Heathrowand New York.

Overseas branchesWe fly to a number of destinations aroundthe world (see inside front cover). Inaddition to the overseas branches we haveestablished in many of these countries, we have branches in countries to which we do not fly.

Suppliers, partners andalliances

SuppliersOverall supplier costs, excluding fuel, were up nearly 7 per cent year on year,reflecting significant inflationary pressureson suppliers’ own costs. In continuing tocontrol our costs, we have decided toprioritise those projects that really addvalue to the customer proposition.

Goods and services are procured througha strategic sourcing process. We usebenchmarking principles to make sure we derive the maximum value from them,both at the point of purchase and over thelife of the supply contract.

During the year we signed major in-flightcatering agreements with three suppliers,all of which will come into effect from April1, 2010. We believe these agreements willset a new benchmark for high-qualityairline catering. Using three suppliers willalso help us to minimise our exposure tosupplier failure.

We continued to reduce our carbonfootprint with the delivery of the first of our new Boeing 777 aircraft during the year. Lower fuel burn and reducedenvironmental impact were key factors in our choice of aircraft.

In addition, we have selected the Thales in-flight entertainment system for all newaircraft delivered from 2010. With biggerscreens, the multimedia system will givecustomers access to over 100 movies,300 programmes and 400 CDs as well as a range of radio programmes and podcasts

“During a recent survey, two thirds of respondentsrated ba.com as Excellent or Very Good – proof thatour creative development ofthe website is providing realvalue to our customers.”




Overview

Our business

Almost a third of all our bookings are now made on ba.com, with almost half of all European leisure fares sold via the UK site.This year we introduced a new feature allowing customers toupgrade their booking at any time between buying a ticket andchecking-in online.

A large number of our passengers now check-in online. Theyclearly enjoy the convenience of this service. For that reason wehave now launched a new popular service, allowing customers tocheck-in or access real time arrivals and departures informationthrough their mobiles.


The way we run our businessThe marketplace continued

whenever they want. The system is lighterso will also help us reduce aircraft weightand use less fuel.

Supplier riskMitigating supplier risk is a key priority,particularly in the current economicclimate. Our procurement team recordsand measures risk across our mostimportant suppliers. We have currentlyidentified a number of suppliers who, ifthey ceased trading or experienced severedifficulties, would have a serious impact onour ability to operate. For these suppliers,risk is measured across five dimensions,updated each month and we takemitigating action when any supplier is deemed to be in trouble.

In addition to managing supplier risks, wealso routinely monitor the financial healthof critical suppliers using monthly Dun &Bradstreet company reports as an earlywarning system.

We use business continuity plans to coverthe risk of supply failures and regularlyreview their effectiveness with the suppliersthemselves. Equally, we make sure effectivecontingency plans are in place to respondto any supply interruption.

Payment performanceWe have again made good progress onpaying suppliers in accordance with ouragreed terms. On average, 91 per cent of payments were on time in the UK for the year ended March 31, 2009. This compares with 88 per cent in thepreceding year and exceeds our 90 percent target. Next year we expect toimprove further through increased use of e-invoicing and purchasing cards.

We are a signatory to the Confederation of British Industry (CBI) code of practiceon supplier payment and are committed to paying our suppliers on agreed terms.The number of days’ purchases in creditorsat March 31, 2009, is calculated inaccordance with the provisions of theCompanies Act 1985 and was 32 days(2008: 33 days).

Corporate responsibility in the supplier baseWe are committed to making responsiblepurchasing decisions, and during 2008/09started to refine our purchasing processand train our procurement team to makesure this happens. We will continue tosurvey potential suppliers to assess theircorporate responsibility credentials, usingindependently-held, self-certification datawhen deciding with which suppliers to work.

Procurement deliveryUsing preferred suppliers helps us to control costs. In December 2008, 96 per cent of our external spend was with 500 suppliers who have all been awarded formal preferred supplier status. Increasingly we are also making sure our spend goes through our approved order-basedprocess. In December 2008, 99 per cent of spend was approved this way.

Partners and alliancesWe maintain commercial arrangementswith other airlines covering scheduledpassenger and cargo services on a smallnumber of our international routes.Commercial arrangements can govern,among other things, capacity offered by each airline, how revenue is sharedbetween the airlines and how schedulesare coordinated. In very few cases, somecommercial arrangements betweenourselves and other airlines are requiredunder the relevant air services agreements.

“We are committed tomaking responsiblepurchasing decisions, andduring 2008/09 started to refine our purchasingprocess and train ourprocurement team to make sure this happens.”

Overview

Our business




We have improved the onboard experience for our premiumshorthaul customers, offering them greater space and privacy by keeping the middle seat free. And we have not forgotten our youngest passengers who can now enjoy an entertainmentpack on longhaul flights featuring that much-loved character,Paddington Bear.

2008/09

£5.4mdonated to charity.

BA Fun Run

£55,000raised for Cancer Research UK.


The way we run our businessCommunity investment

We have a long history of investing in the communities in which we operate. This work continues and in 2008/09 we supported over 120 community andconservation organisations in a variety ofways, including donating travel awards,cargo and excess baggage space.

We work closely with the communitiesaround Heathrow and the UK regions. Ourmain priorities include education and youthdevelopment, supporting volunteering byour colleagues and promoting sustainabletourism, heritage and the environment.

We continue to be a member of both the London Benchmarking Group (LBG)and the Business in the Community (BITC)15 Percent Club.

Education and youth developmentOur Community Learning Centre – close to our Waterside headquarters atHeathrow – has welcomed nearly 50,000young people and adult learners on arange of education programmes since itsopening in 1999. Programmes relevant to the school curriculum are run inpartnership with the United NationsInternational Children’s Emergency Fund(UNICEF) focusing on places we fly to,using workshops on customer service,information and communicationtechnology and the environment.

LanguagesThe British Airways language flag award,offered to schools across the UK, has been recognised by the Foreign andCommonwealth Office and in 2008 wonthe Business Language Champion Partnershipof the Year Award. We are seeking officialaccreditation for the programme which willallow the test to earn university points. Over1,500 young people have gained a flag awardin languages ranging from French to Urdu.

PartnershipsIn partnership with the Natural HistoryMuseum, we have developed programmesallowing pupils from Heathrow schools tovisit the museum, meet scientists andexperience the work of the Darwin Centre.

Overseas, we have been working with UKand South African partners on a multi-agency Safer Communities programme in South Africa to reduce crime andincrease community confidence. Since the programme began in 2003, over 40schools and more than 200 volunteeryouth coaches have been trained.

Change for GoodOur partnership with UNICEF, Change for Good, raised £3 million in the year toMarch 31, 2009. The onboard collectionprogramme, supported by over 2,400 cabincrew champions, enabled us to help fundUNICEF’s work with vulnerable children.Change for Good celebrated reaching its£25 million milestone in July 2008.

In August 2008 our Chief Executive visitedTanzania to see the work of Change forGood at first hand, particularly how fundsare being used to support and treatmothers and babies affected by HIV/AIDS.We have also invested significantly in Chinato support literacy programmes and inNigeria our donations have been used to buy malaria nets.

Employee fundraisingOver 3,500 retired and current employeesdonated over £630,000 directly from theirpayroll to their chosen charities throughour Giving Scheme during the year. Inaddition, we supported Children in Needand Red Nose Day across the airlineraising over £13,000 for charities in theUK and overseas.

Last year’s BA Fun Run raised in excess of£55,000 for Cancer Research UK. During2008/09 our World Cargo team collectedand delivered over 95 tonnes of high-quality gifts, donated by employees fromacross the airline.

Charitable donationsBITC reported our total direct and in-kinddonations for 2008/09 at £5.4 million(2008: £5.7 million). Of these, directcharitable donations amounted to£444,000 (2008: £398,000).

“Our partnership withUNICEF, Change for Good,celebrated reaching its £25 million milestone in July 2008.”

Overview

Our business




Our Community Learning Centre – close to our Watersideheadquarters at Heathrow – has welcomed nearly 50,000 youngpeople and adult learners on a range of education programmessince its opening in 1999. Programmes relevant to the schoolcurriculum are run in partnership with the United NationsInternational Children’s Emergency Fund (UNICEF) focusing on places we fly to, using workshops on customer service,information, communication technology and the environment.

Over

55,000tonnes of CO2 were offset by customers in 2008.

35%of dry waste at Heathrow and Gatwick was recycled in 2008.

The way we run our businessEnvironment


Climate changeClimate change is an issue of hugeimportance to us and we have a long-termcommitment to address it. Our climatechange programme covers four main areas:policy measures to curb emissions growth;voluntary carbon offsetting; fuel efficiency;and support for scientific research.

Our target is to reduce our net CO2

emissions by 50 per cent by 2050, relativeto 2005. Meeting this target will requireinvestment in new technology, sustainablebiojet fuels and in cost-effective emissionsreductions in other sectors of the economythrough the creation of effective globalcarbon trading markets.

Governments will come together inDecember 2009 to discuss a future globalagreement on climate change. Internationalaviation emissions were not included in the Kyoto Protocol, but we believe thatthey must be incorporated into this newagreement. We are playing a leading role in aviation groups to develop a globalpolicy approach for the sector.

In December 2008 the European Unionfinalised the conditions for includingaviation in its Emissions Trading System(ETS). With our experience of emissionstrading since 2002 we are well placed to meet the EU ETS requirements.

Our offsetting scheme allows passengersto add a carbon offset when they book aflight through ba.com. During 2008, some150,000 customers offset over 55,000tonnes of CO2 in this way and theircontributions have helped fund UN-certified carbon cutting initiatives in Chinaand Brazil. In March 2009 our schemebecame the first airline offset product to meet the requirements of the UKGovernment’s Quality Assurance Schemefor Carbon Offsetting – a guarantee thatwe are achieving genuine, additional andmeasurable carbon reductions.

We continue to look for ways to improvefuel efficiency and over 600 projects haveso far been assessed. Of these, 55 havebeen implemented, delivering over 65,000tonnes of CO2 savings, equivalent to nearly

21,000 tonnes of fuel. In addition, we have reduced CO2 emissions associatedwith our UK property portfolio by nearly11 per cent.

In 2008 our carbon efficiency, expressedin grammes of CO2 per passenger kilometre(gCO2/pkm), was just over 107 grammes.Our target is to improve that figure to 83gCO2/pkm by 2025. Our carbon footprintwas 17.6 million tonnes of CO2 in 2008.

We are also supporting a number ofscientific research projects. These includethe European Commission’s IAGOSproject which is investigating whetheraircraft can be used to collect atmosphericdata in-flight and a partnership to developnew policies on preventing deforestation.

WasteWe aim to minimise waste, reduce disposalto landfill and increase reuse and recycling.Where we cannot prevent waste disposal,we aim to manage our waste responsibly.

In 2008 we recycled 35 per cent of drywaste at Heathrow and Gatwick (up from30 per cent the year before). We have setourselves the target of recycling 50 percent by 2010. We will achieve this throughthe provision of more recycling centres,handling a wider range of materials and byencouraging better segregation of waste.

The amount of waste at Heathrow andGatwick sent to landfill fell by 7.2 per centto 3,424 tonnes, during the year. Our non-recyclable waste at Heathrow and Gatwickwill be processed through a waste toenergy plant before the end of 2009,helping us to meet our target of zero waste to landfill by 2010.

NoiseWe are investing in quieter aircraft andtechnology and aim to change the way we fly to reduce the noise of our activities.We have set a target to reduce our averagenoise per flight by 15 per cent by 2015.

Night noise is a particular concern forpeople living near Heathrow and is one ofthe key issues we want to address. During2008, we contravened the noise limits at

“In March 2009 our carbonoffset scheme became thefirst airline offset productto meet the requirements of the UK Government’sQuality Assurance Scheme.”




Overview

Our business

We are investing in quieter aircraft and technology and aim to change the way we fly to reduce the noise of our activities. We have set a target to reduce our average noise per flight by 15 per cent by 2015.

We also aim to reduce our CO2 emissions by 50 per cent by2050, relative to 2005. Meeting this target will require investmentin new technology, sustainable biojet fuels and in cost-effectiveemissions reductions in other sectors of the economy through the creation of effective global carbon trading markets.


The way we run our businessEnvironment continued

are now developing similar procedures to taxi out to the runway. These measureswill cumulatively reduce CO2 and NOX

emissions, fuel consumption and noise.

Fleet modernisationIn response to delivery delays for our new efficient Boeing 787 aircraft, we havecontracted for six Boeing 777-300ERaircraft (two acquired, four leased) due tostart arriving in 2010, with options on afurther four. We have ordered two AirbusA318 aircraft for our transatlantic servicesfrom London City Airport. Additionally, we have ordered six Embraer E190SR andfive E170 aircraft to replace the RJ85 andRJ100 aircraft currently operated fromLondon City Airport.

We are also improving our performance on the ground. At Terminal 5, we haveinvested in buses specified to the futureEuro 5 exhaust emission standard and afleet of electric baggage tugs. Remotemonitoring by telematics technology isbeing used to manage fleet efficiency andan automatic fuel management system hasbeen fitted to refuelling equipment atHeathrow. We continue to be a member ofthe Heathrow Clean Vehicles Programme.

Heathrow 36 times, a reduction of 23 percent compared with 2007. This year, thesewere principally a result of Boeing 747-400 departures being delayed.

At Heathrow, we use a ContinuousDescent Approach on landing to save fueland cut noise. During 2008, 95 per cent of all day and night flights operated thisway, compared with an airport average of82 per cent for daytime and 88 per centfor night time flights.

Air qualityWe have a number of operating initiativesto improve our air quality performance. Wehave already achieved a reduction in NOX

emissions (nitrogen oxide – a greenhousegas) through the modification of Boeing747 (RB211) engines and Boeing 777(GE90) engines. We plan to further modifyour Boeing 737 engines to deliver a20 per cent reduction in NOX.

At Terminal 5 and other airportsworldwide, we are able to use aircraftstands with fixed ground power and pre-conditioned air which means we will relyless on aircraft auxiliary power units. Wehave developed procedures for aircraft totaxi on one less engine after landing, and

Summary of environmental achievements and targetsTarget 2008 a 2007 a 2006 a

Carbon efficiency gCO2/pkm b 83 by 2025 107 110 110

CO2 emissions (million tonnes) 17.6 17.7 16.6

Heathrow departure noise violations – day 4 1 9

Heathrow departure noise violations – night 32 46 56

Continuous Descent Approach (Heathrow) % – day 95 95 95 84

Continuous Descent Approach (Heathrow) % – night 95 95 94 88

Total waste at Heathrow and Gatwick – including our catering companies (metric tonnes) 26,184 27,121c 26,920

% recycling (Heathrow and Gatwick) 50 per cent by 2010 35.1 30.1 28.9

Waste to landfill (tonnes) (Heathrow and Gatwick) Zero by 2010 3,424 3,688 4,063

Waste per passenger (kg) (Heathrow and Gatwick) reduce by 2 per cent per annum 0.78 0.79 c 0.78

Heathrow air quality/NOX emissions to 1,000ft (metric tonnes) 1,081 1,107 1,096a Calendar years.

b With effect from 2008, traffic statistics now include data related to customers who have flown on ‘frequent flyer’ mileage redemption tickets. This changebrings the Group into line with industry standards, and also into line with all major scheduled carriers.

c Increased due to revised data on catering waste.

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