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BA's Broughton slams US/EU over failing carriers, bilateral relations

20-Jul-2005

LONDON (XFNews) - Martin Broughton, chairman of British Airways PLC, today revived his criticism of the US and European governments' attitude to failing carriers and bilateral relations.

"In the US the government continues to prop up the walking dead through the iniquitous Chapter 11, dragging the survivors inexorably into bankruptcy, and in Europe the Commission approves what looks like more state aid for Alitalia," he said in his maiden speech as chairman at the UK flag carrier's annual general meeting.

Broughton, who succeeded Lord Marshall as chairman last July, noted the current bilateral system dictates that new routes are negotiated government-to-government and then allocated to airlines -- but require the airline to be nationally owned to be allowed to operate them.

"What other industry asks their government to do new business development for them?" he asked.

"More importantly, in an industry crying out for consolidation any Wall Street investment banker dreaming up a poison pill as effective as the bilateral system would be in court at best and in jail more likely," he continued.

"And yet when it comes to EU/US Open Skies discussions the American government insists on defending the 'no foreign ownership' rules as being compatible with liberalisation and open markets. And they persuaded the EU Commission to go along with that definition."

But the chairman applauded the UK government for "insisting Open Skies should mean just that".

Broughton went on to talk about three key issues that need to be addressed by the BA board -- costs, the 1.4 bln stg pensions deficit and the resumption of dividend payments.

On costs he noted "there is still much to be done, and a number of working practices need to be changed to get us fit to move into Terminal Five" in 2008.

BA has not paid a dividend since 2001, preferring to preserve its cash and cut its debt.

Broughton confirmed that the airline is unlikely to return to the dividend list for the current year to end-March 2006 because the effect of adopting the new International Financial Reporting Standards (IFRS) is to wipe out funds for such payments.

Answering a shareholder's question, the chairman also revealed that BA is considering including fuel surcharges in its stated ticket prices.

"We have been looking at how much these costs should be included in the ticket," he said.

At 2.32 pm shares in BA were down 2-1/2 pence at 273-3/4, valuing the airline at 2.97 bln stg.


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