bealine
2nd Nov 2007, 10:29
Copy of an internal memorandum today from WW's office to the staff.
Half-year headlines:
Operating profit of £556 million
Operating margin of 12.5 per cent
Profit before tax of £593 million
Longhaul fleet order announced
Terminal 5 customer trials continuing
Full year fuel costs expected to top £2 billion
Ten per cent operating margin on track
We have today announced record half-year profits for 2007-08, covering the
months of April to September.
The results reflect the hard work you have all put in to tackle waste and
improve efficiency. Our profits have been driven by our excellent cost
performance, with total costs down £150 million.
We achieved an operating profit of £556 million, up £114 million on last
year, while the operating margin of 12.5 per cent is up 2.7 points on the
first half of 2006-07.
Profit before tax for the half-year was £593 million, up £122 million on
last year.
We see every possibility of achieving the 10 per cent operating margin
target for the year but to do so we also need a record second half of the
year.
The financial position of the company is strong, which gave us the
confidence to order 12 Airbus A380 aircraft and 24 Boeing 787s, with
options for a further 25 aircraft. The fleet order is fundamental to our
key business objective of investing in growth and enables us to open new
routes and grow existing ones.
The new aircraft also set the gold standard when it comes to environmental
performance. We have set a new target to improve our aircraft fuel
efficiency by 25 per cent by 2025. To support our commitment to the
environment we have appointed a new head of corporate social responsibility (CSR).
Looking ahead, our customers will benefit from the removal of restrictions
on hand-baggage, which we expect to be announced shortly. This will go a
long way to relieving the hassle factor of the one bag limit.
While punctuality and baggage remain a challenge at Heathrow, where
facilities are old and over-stretched, we continue to staff up to record
levels in the terminals and have improved our direct baggage performance in
recent weeks. This is despite the 15 per cent increase in hold baggage.
Both these areas will improve significantly when we move to Terminal 5 but
a huge amount of effort and resource has gone into improving our current
performance.
While these results are strong, we still face significant challenges. Our
fuel bill is expected to top £2 billion for the first time, while exchange
rates are putting pressure on our revenue. In the first half of the year,
total revenue was down 0.8 per cent while passenger revenue, at £3.9
billion, fell slightly. Therefore a record second half of the year is
crucial if we are to hit the 10 per cent margin.
Seat factor was down almost one point to 78.4 per cent, while yields rose
half a per cent. Club World performed strongly, contributing to a 2.5 per
cent increase in premium traffic. Non-premium traffic continues to be soft
on the North Atlantic and Europe.
Unit costs were down 2.6 per cent while employee costs fell 7.1 per cent to
almost £1.1 billion.
Lower cargo volumes, driven by tougher competition, led to a disappointing
result in the cargo business, with revenue falling to £290 million.
Handling charges and other operating costs have risen by 3.4 per cent due
to the cost of dealing with baggage issues.
Engineering costs were up 6.7 per cent because of price rises in
maintenance and higher volumes.
Although the weak US dollar has helped our cost performance, the flipside
is the negative impact on our substantial US revenues. As a result, we have
reduced revenue guidance for the year to between three and three and a half
per cent.
Costs excluding fuel are expected to be down by £100 million.
Our cash and net debt were affected by payments into the New Airways
Pension Scheme and to the US Department of Justice for fines over anti
competitive activity.
Our credit rating returned to investment grade, which helped us to
negotiate finance for aircraft deliveries until 2011.
Our cash balance stands at £1.8 billion, while net debt is up £422 million
to £1.4 billion. Capital expenditure, at £297 million, was higher than last
year as we took delivery of three new Airbus A321 aircraft and continue to
invest in the new Club World cabin and Terminal 5.
Away from financial matters, the opening of Terminal 5 is now just 145 days
away. When our amazing new home opens on March 27 next year – on time and
on budget – it will be a national success story and a great showcase in the
run-up to the 2012 Olympics.
An exhaustive six-month trial is now underway to ensure our new home
delivers a brilliant experience for our customers.
Half-year headlines:
Operating profit of £556 million
Operating margin of 12.5 per cent
Profit before tax of £593 million
Longhaul fleet order announced
Terminal 5 customer trials continuing
Full year fuel costs expected to top £2 billion
Ten per cent operating margin on track
We have today announced record half-year profits for 2007-08, covering the
months of April to September.
The results reflect the hard work you have all put in to tackle waste and
improve efficiency. Our profits have been driven by our excellent cost
performance, with total costs down £150 million.
We achieved an operating profit of £556 million, up £114 million on last
year, while the operating margin of 12.5 per cent is up 2.7 points on the
first half of 2006-07.
Profit before tax for the half-year was £593 million, up £122 million on
last year.
We see every possibility of achieving the 10 per cent operating margin
target for the year but to do so we also need a record second half of the
year.
The financial position of the company is strong, which gave us the
confidence to order 12 Airbus A380 aircraft and 24 Boeing 787s, with
options for a further 25 aircraft. The fleet order is fundamental to our
key business objective of investing in growth and enables us to open new
routes and grow existing ones.
The new aircraft also set the gold standard when it comes to environmental
performance. We have set a new target to improve our aircraft fuel
efficiency by 25 per cent by 2025. To support our commitment to the
environment we have appointed a new head of corporate social responsibility (CSR).
Looking ahead, our customers will benefit from the removal of restrictions
on hand-baggage, which we expect to be announced shortly. This will go a
long way to relieving the hassle factor of the one bag limit.
While punctuality and baggage remain a challenge at Heathrow, where
facilities are old and over-stretched, we continue to staff up to record
levels in the terminals and have improved our direct baggage performance in
recent weeks. This is despite the 15 per cent increase in hold baggage.
Both these areas will improve significantly when we move to Terminal 5 but
a huge amount of effort and resource has gone into improving our current
performance.
While these results are strong, we still face significant challenges. Our
fuel bill is expected to top £2 billion for the first time, while exchange
rates are putting pressure on our revenue. In the first half of the year,
total revenue was down 0.8 per cent while passenger revenue, at £3.9
billion, fell slightly. Therefore a record second half of the year is
crucial if we are to hit the 10 per cent margin.
Seat factor was down almost one point to 78.4 per cent, while yields rose
half a per cent. Club World performed strongly, contributing to a 2.5 per
cent increase in premium traffic. Non-premium traffic continues to be soft
on the North Atlantic and Europe.
Unit costs were down 2.6 per cent while employee costs fell 7.1 per cent to
almost £1.1 billion.
Lower cargo volumes, driven by tougher competition, led to a disappointing
result in the cargo business, with revenue falling to £290 million.
Handling charges and other operating costs have risen by 3.4 per cent due
to the cost of dealing with baggage issues.
Engineering costs were up 6.7 per cent because of price rises in
maintenance and higher volumes.
Although the weak US dollar has helped our cost performance, the flipside
is the negative impact on our substantial US revenues. As a result, we have
reduced revenue guidance for the year to between three and three and a half
per cent.
Costs excluding fuel are expected to be down by £100 million.
Our cash and net debt were affected by payments into the New Airways
Pension Scheme and to the US Department of Justice for fines over anti
competitive activity.
Our credit rating returned to investment grade, which helped us to
negotiate finance for aircraft deliveries until 2011.
Our cash balance stands at £1.8 billion, while net debt is up £422 million
to £1.4 billion. Capital expenditure, at £297 million, was higher than last
year as we took delivery of three new Airbus A321 aircraft and continue to
invest in the new Club World cabin and Terminal 5.
Away from financial matters, the opening of Terminal 5 is now just 145 days
away. When our amazing new home opens on March 27 next year – on time and
on budget – it will be a national success story and a great showcase in the
run-up to the 2012 Olympics.
An exhaustive six-month trial is now underway to ensure our new home
delivers a brilliant experience for our customers.