Financial performance
Our operating profit in the year, at £875 million, was up £273 million, against a background of ever-increasing fuel prices. Pre-tax profits were £883 million, up £272 million on the previous year. Our financial strength has been significantly improved over the last few years and these results put us in a good position to deal with the extremely difficult climate which is now gripping the industry – caused by economic slowdown and record fuel prices.
Revenue
Revenue for the year was £8,753 million, up 3.1 per cent, despite the negative impact of exchange rate movements. Excluding the impact of exchange, primarily down to the weaker US dollar, revenue was up 4.6 per cent.
Our passenger revenue, at £7,541 million, was up 3.8 per cent, on capacity up 0.8 per cent. Seat factor, being the measure of how full our flights are, was down 0.5 points to 75.6 per cent. Despite the negative impact of exchange rates, yields (measured as revenue per passenger kilometre flown) were up 3.6 per cent, mainly due to more premium passengers travelling with us. Demand for our premium cabins remained strong. The new Club World product is now available on our entire 747 fleet, and this added almost 10 per cent additional premium capacity during the second half of the year. Shorthaul premium traffic weakened, partly due to concerns within the financial markets. Non-premium traffic on the North Atlantic was soft during the year and this, in part, contributed to a reduction in non-premium revenue.
Our cargo revenue for the year was £616 million, up 3.0 per cent. Excluding the impact of exchange, it was up 4.8 per cent. Cargo capacity, measured in available tonne kilometres (ATK), decreased by 0.2 per cent. Our cargo volumes, however, recovered strongly in the year and were up by 4.2 per cent. Premium product volumes continued to grow and were up by 12.6 per cent. Our cargo yield (revenue per cargo tonne kilometre) decreased by 1.2 per cent. Increased cargo fuel surcharges and a better premium mix in the second half of the year helped offset ongoing price pressures evident in a number of markets.
The strong euro continues to impact demand from Europe, and price pressures due to overcapacity continued to be a feature in South Asia. Flown volumes from the Americas and the UK improved, and Asia Pacific continues to perform strongly.
Overall load factor for the year was 71.2 per cent, up 0.8 points on last year.
Total revenue £ million
Operating expenditure
Our cost performance in the year was strong. Our expenditure on operations decreased by 0.7 per cent compared to last year, with unit costs (total expenditure on operations per ATK) reducing by 0.5 per cent. This was a major achievement, considering that we were facing rapidly rising fuel costs throughout the year and we had also concentrated significant additional resources on the operation for the move to Terminal 5. Excluding fuel costs, our expenditure on operations reduced by 3.0 per cent.
The table on page 3 summarises total Group expenditure on operations and year on year changes in expenditure over the two financial years ended March 31, 2008 and March 31, 2007.
Our employee costs reduced by 4.9 per cent to £2,166 million. Within this, pension costs were down some £92 million primarily due to the agreed changes to the future service benefits as part of a 10-year programme to fund the deficit in the New Airways Pension Scheme (NAPS). The changes were implemented in February 2007. Lower redundancy costs and manpower efficiencies more than offset inflation-linked wage increases. Our employee costs included £35 million in respect of our Employee Reward Plan (ERP) and management bonuses. The average number of employees in the Group, measured in manpower equivalents (MPE), fell by 2.5 per cent to 42,403 and productivity (measured in ATKs per MPE) improved by 2.4 per cent.
