Soaring debt and fuel bill hit BA dividend

BRITISH Airways will not pay a dividend for at least two years, new chairman Martin Broughton has said.

He said the airline, which is at the top of the profitability league, was still not making enough to pay its shareholders and renew its fleet.

But Broughton predicted that in two years BA would be achieving profit margins of ten per cent, which would trigger dividend payments and a fleet renewal programme.

BA, whose current margin stands at about seven per cent, is confident it can achieve the higher target, even though soaring fuel prices will cost an extra £400 million-a year. The company is also struggling with a huge pension deficit and debts of £3 billion.

Broughton, who was in China for the airline's inaugural flight to Shanghai, said the key to paying dividends was cutting costs.

And he said BA, which has just gone through a painful redundancy programme that cost 13,000 jobs, would be forced to make further job cuts.

The airline's move to Heathrow's Terminal 5 in 2008 would give it a chance to slash costs and change working practices. 'There is no alternative to cutting costs and it will mean further job cuts,' he said.

Broughton also disclosed that BA was in talks about buying an advanced version of the 747 jumbo jet if Boeing decides to go ahead with the model.

He hinted that BA might replace its present 747 fleet with American planes rather than the new giant Airbus A380. Meanwhile, the company is holding two trials to review the way it runs its short-haul fleet.

It is considering either copying no-frills airlines by making passengers pay for their meals, or offering even more luxury to premium passengers.