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Note 14: Property, plant and equipment

a  Group

  Group
£ million Fleet Property Equipment Total
Cost
Balance at 1 April 2008 11,389 1,508 804 13,701
Additions (note 14d) 584 54 13 651
Disposals (118) (45) (30) (193)
Reclassifications (19) 1 (1) (19)
Exchange movements   (2) (3) (5)
Balance at 31 March 2009 11,836 1,516 783 14,135
Additions (note 14d) 518 10 26 554
Disposals (231) (6) (64) (301)
Reclassifications (170) (1) (171)
Exchange movements (1)     (1)
At 31 March 2010 11,952 1,520 744 14,216
Depreciation and impairment
Balance at 1 April 2008 5,413 531 494 6,438
Charge for the year 561 59 52 672
Disposals (116) (45) (29) (190)
Reclassifications (18)     (18)
Balance at 31 March 2009 5,840 545 517 6,902
Charge for the year 616 61 46 723
Disposals (113) (6) (64) (183)
Reclassifications (130)     (130)
At 31 March 2010 6,213 600 499 7,312
Net book amounts
31 March 2010 5,739 920 245 6,904
31 March 2009 5,996 971 266 7,233
Analysis at 31 March 2010
Owned 2,581 904 225 3,710
Finance leased 2,196 17 2,213
Hire purchase arrangements 770 770
Progress payments 71 16 3 90
Assets not in current use* 121     121
  5,739 920 245 6,904
Analysis at 31 March 2009
Owned 2,535 950 260 3,745
Finance leased 2,004 2,004
Hire purchase arrangements 1,342 1,342
Progress payments 85 21 6 112
Assets not in current use* 30     30
  5,996 971 266 7,233
  Group
£ million 2010 2009
The net book amount of property comprises:
Freehold 258 267
Long leasehold improvements 253 260
Short leasehold improvements** 409 444
At 31 March 920 971

*During the year, six Boeing 747-400 aircraft were temporarily stood down, bringing the total number of Boeing 747-400 aircraft in temporary storage to eight. The net book value of the aircraft as at 31 March 2010 amounts to £121 million (2009: two aircraft, £30 million). These aircraft are expected to return to the operating fleet and, as such, the Group continues to depreciate the aircraft.

**Short leasehold improvements relate to leasehold interests with a duration of less than 50 years.

As at 31 March 2010, bank and other loans of the Group are secured on fleet assets with a cost of £1,572 million (2009: £624 million) and letters of credit of £294 million in favour of the British Airways Pension Trustees are secured on certain aircraft (2009: £330 million).

Included in the cost of tangible assets for the Group is £345 million (2009: £349 million) of capitalised interest.

Property, plant and equipment with a net book value of £118 million was disposed of by the Group during the year ended 31 March 2010 (2009: £3 million) resulting in a net loss on disposal of £16 million (2009: gain £2 million).

b  Company

  Company
£ million Fleet Property Equipment Total
Cost
Balance at 1 April 2008 11,042 1,421 736 13,199
Additions 559 54 8 621
Disposals (118) (45) (30) (193)
Reclassifications (19)     (19)
Balance at 31 March 2009 11,464 1,430 714 13,608
Additions 419 10 24 453
Disposals (149) (6) (31) (186)
Net transfers to subsidiary undertakings (23) 1 (22)
Reclassifications (165)   (1) (166)
At 31 March 2010 11,546 1,434 707 13,687
Depreciation and impairment
Balance at 1 April 2008 5,248 497 435 6,180
Charge for the year 545 58 50 653
Disposals (116) (45) (29) (190)
Reclassifications (18)     (18)
Balance at 31 March 2009 5,659 510 456 6,625
Charge for the year 598 59 43 700
Disposals (86) (6) (31) (123)
Net transfers to subsidiary undertakings (19) (19)
Reclassifications (129)     (129)
At 31 March 2010 6,023 563 468 7,054
Net book amounts
31 March 2010 5,523 871 239 6,633
31 March 2009 5,805 920 258 6,983
Analysis at 31 March 2010
Owned 2,472 855 219 3,546
Finance leased 2,094 17 2,111
Hire purchase arrangements 770 770
Progress payments 66 16 3 85
Assets not in current use* 121     121
  5,523 871 239 6,633
Analysis at 31 March 2009
Owned 2,356 899 252 3,507
Finance leased 2,004 2,004
Hire purchase arrangements 1,342 1,342
Progress payments 73 21 6 100
Assets not in current use* 30     30
  5,805 920 258 6,983
  Company
£ million 2010 2009
The net book amount of property comprises:
Freehold 212 220
Long leasehold improvements 250 256
Short leasehold improvements** 409 444
At 31 March 871 920

*During the year, six Boeing 747-400 aircraft were temporarily stood down, bringing the total number of Boeing 747-400 aircraft in temporary storage to eight. The net book value of the aircraft as at 31 March 2010 amounts to £121 million (2009: two aircraft, £30 million). These aircraft are expected to return to the operating fleet and, as such, the Company continues to depreciate the aircraft.

**Short leasehold improvements relate to leasehold interests with a duration of less than 50 years.

As at 31 March 2010, bank and other loans of the Company are secured on fleet assets with a cost of £1,500 million (2009: £551 million).

Included in the cost of tangible assets for the Company is £344 million (2009: £347 million) of capitalised interest.

Property, plant and equipment with a net book value of £63 million was disposed of by the Company during the year ended 31 March 2010 (2009: £3 million) resulting in a net loss on disposal of £8 million (2009: gain £2 million).

c  Depreciation

Fleet is generally depreciated over periods ranging from 18-25 years after making allowance for estimated residual values. Effective annual depreciation rates resulting from those methods are shown in the following table:

  Group
Per cent 2010 2009
Boeing 747-400 and 777-200 3.7 3.7
Boeing 767-300 4.8 4.8
Boeing 757-200 4.4 4.4
Boeing 737-400 4.8 4.8
Airbus A318, A319, A320 and A321 4.9 4.9
Embraer E170 and E190 6.4  

For engines maintained under ‘pay-as-you-go’ contracts, the depreciation lives and residual values are the same as the aircraft to which the engines relate. For all other engines, the engine core is depreciated to residual value over the average remaining life of the related fleet. Major overhaul expenditure is depreciated over periods ranging from 54-78 months, according to engine type.

During the prior year, the economic lives of the Boeing 737-400 aircraft were reviewed and extended during the year in accordance with the planned usage of the aircraft. The net impact to the income statement was a £1 million decrease to the depreciation charge for the year ended 31 March 2009.

Property, with the exception of freehold land, is depreciated over its expected useful life subject to a maximum of 50 years. Equipment is depreciated over periods ranging from four to 20 years, according to the type of equipment.

d  Analysis of Group property, plant and equipment additions

  Group
£ million Fleet Property Equipment Total 2010 Total 2009
Cash paid 476 7 9 492 547
Capitalised interest 1 1 4
Acquired through business combinations 6
Reclassification of operating leases to finance leases 122
Accrual movements 41 3 17 61 (28)
At 31 March 518 10 26 554 651

During the year ended 31 March 2010, the Group acquired property, plant and equipment with a cost of £554 million (2009: £651 million). Prior year additions included £6 million of additions arising from the acquisition of L’Avion (note 5) and £122 million relating to the reclassification of 10 Airbus A319 aircraft from operating leases to finance leases, where the Group waived the right to return the aircraft to the lessor.

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