The embarrassing events surrounding the opening of Terminal 5 have been well documented, as has our deep regret at the frustration and inconvenience the disruption caused.
I want to reassure you that our recovery plan is in place and we are determined to rebuild our reputation worldwide and restore the trust of our customers in British Airways. In the meantime our staff are rising to the challenge of delivering the service our customers deserve, despite the difficulties of working across three terminals at Heathrow.
While the change to a phased move to Terminal 5 has had a broader impact on Heathrow, it is vital that our operation is embedded fully before the next stage of development at the airport. Although this has put back the move of other airlines into Terminal 4, BAA agrees that it is in the interests of our industry and UK plc that we move forward together.
These events have taken the gloss off a very good set of results which we achieved despite record fuel costs and the impact of economic slowdown, caused mainly by the credit crunch in the US.
Financial performance
Our operating profit of £875 million gives us a record operating margin of 10 per cent. Our pre-tax profit of £883 million is also a record.
Achieving 10 per cent operating margin was a major milestone for our Company. It has been our goal since 2002 and one of the necessary triggers for the restoration of the dividend. The other was addressing the pensions deficit which was one of the biggest of the FTSE 100 companies.
The Board has always maintained that we needed to tackle our pension deficit, strengthen our balance sheet and achieve a 10 per cent operating margin before we would restore a dividend. Based on successful resolution of these matters, the Board has decided on a dividend policy for the current year to start at a modest level that reflects our lowered financial expectations for the coming year and that will allow it to grow over time and be consistent with other cyclical companies and our major airline competitors.
Our revenue performance was good, up 3.1 per cent in 2007/08. Operating costs were down 0.7 per cent despite the impact of rising fuel costs. Fuel continues to be a major cost and at current prices we expect our fuel bill next year to be some £3 billion, up £1 billion on this year. Our cargo performance improved and cargo revenue was up 3.0 per cent.
