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British Airways Plc Year Ended 31 December 2020

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British Airways Plc Year Ended 31 December 2020 British Airways Plc Annual Report and Accounts Year ended 31 December 2020 Company registration number: 1777777 This page has been intentionally left blank Contents Officers and professional advisers 1 Strategic and Directors’ reports Strategic report Management review and outlook 2 Financial review 5 Principal risks and uncertainties 8 Section 172 statement 14 Directors’ report 18 Directors’ responsibilities statement in relation to the financial statements 22 Independent auditor’s report 23 Group financial statements Group consolidated income statement 28 Group consolidated statement of other comprehensive income 29 Balance sheets 30 Cash flow statements 31 Statements of changes in equity 32 Notes to the financial statements 33 Subsidiary undertakings and other investments 94 Operating and financial statistics 96 Fleet table 97 Glossary 98 Officers and professional advisers Directors Alex Cruz (Chairman) Alison Reed (Deputy Chairman) Sean Doyle (Chief Executive Officer) Rebecca Napier (Chief Financial Officer) Gavin Patterson Julia Simpson Lynne Embleton Secretary Andrew Fleming Registered office Waterside PO Box 365 Harmondsworth UB7 0GB Parent company International Consolidated Airlines Group S.A. (‘IAG’) El Caserío, Iberia Zona Industrial nº 2 (La Muñoza) Camino de La Muñoza, s/n, 28042 Madrid Spain Independent auditor Ernst & Young LLP 1 More London Place London SE1 2AF 1 Strategic report The Directors present their strategic report for the year ended 31 December 2020. British Airways Plc (‘British Airways’, ‘BA’, ‘the airline’ or ‘the Group’) is the UK’s largest international scheduled airline and one of the world’s leading global airlines. The Group’s principal place of business is London with significant presence at Heathrow, Gatwick and London City airports. As part of IAG, and together with joint business, codeshare and franchise partners, British Airways operates one of the most extensive international scheduled airline networks. British Airways is a founding member of the oneworld alliance, whose member airlines serve some 1,000 destinations in over 170 territories. In October 2020, Sean Doyle, former CEO of Aer Lingus, took over as CEO of British Airways from Chairman and former CEO, Alex Cruz, who had led the airline since 2016, and steered BA through the first seven months of the COVID-19 crisis. Alex Cruz became non-executive Chairman at this time. The strategic report is presented in the following four sections: • Management review and outlook; • Financial review; • Principal risks and uncertainties; and • Section 172 statement. Management review and outlook Overview • Total revenue: £4,001 million, down 69.9% (2019: £13,290 million) • Operating loss before exceptional items: £2,328 million (2019: £1,921 million profit) • Passengers: 12.3 million, down 74.3% (2019: 47.7 million) • Punctuality: 85% (2019: 76%) 2020 was an exceptionally difficult year as a result of the COVID-19 pandemic. In British Airways’ 100-year history, the airline had never experienced a crisis of this magnitude, which forced us to vastly reduce our flying schedule, workforce, fleet and operation as we navigated continual, fast-changing global travel restrictions and three UK Government lockdowns. Over the year BA saw an average 66% reduction in its schedule compared to 2019. British Airways stopped flying to China at the end of January 2020. By March, the virus had moved throughout Europe and during the same month the UK began its first national lockdown. The UK Government imposed a ban on all but essential travel and between April and June 2020, we operated just 5% of our planned schedule compared with the same period in 2019. During this time, we operated 134 repatriation flights from 21 countries, keeping vital air links open and returning 40,000 Britons to the UK. Over the summer months, travel restrictions that required customers to quarantine were one of the main causes of the downturn in traffic. As restrictions were introduced or lifted, the airline’s Operations team worked tirelessly to reduce or introduce new flights respectively, to benefit customers and generate revenue, creating a dynamic schedule. Often larger aircraft were introduced on busy routes or flights were consolidated to reduce costs. A new route from Heathrow to the Maldives and services to the Caribbean (which benefitted from a travel corridor) were popular with customers. While there was a significant reduction in passenger schedules, cargo demand increased, particularly for Personal Protective Equipment. British Airways, working with IAG Cargo, adapted its Cargo business to ensure cargo only flights had a positive cash contribution. When the results of testing showed vaccines were effective, the airline witnessed a large increase in the numbers of people visiting ba.com to look at flights to Dubai, Florida and New York as well as holidays to the Maldives, the Caribbean, Orlando and the Canary Islands for 2021. However, the introduction of hotel quarantine requirements by the UK Government on 15 February 2021 is expected to greatly impact demand on affected routes while the policy is in place. British Airways continues to operate in a time of great uncertainty, where continually changing global travel restrictions create significant challenges in network planning and scheduling. Business restructuring COVID-19’s devastating impact on travel meant British Airways’ Management Team had no option but to take urgent action to restructure the business to ensure it could emerge from the crisis and still be able to compete. In April 2020, British Airways formally notified trade unions about a proposed restructuring and redundancy programme, subject to consultation. Every option to save as many jobs as possible was explored. In September 2020, by working with the trade unions, British Airways was able to mitigate the number of redundancies, protect as many jobs as possible and reach industrial agreements across the main areas of the business, including the airline’s cabin crew and pilot communities. 2 Strategic report continued Management review and outlook continued Despite reaching agreements, regrettably around 23% of our colleagues left the airline in 2020 as part of the restructure and redundancy programme. To reduce operational complexity, replication and cost, management created one cabin crew fleet based out of Heathrow, outsourced the airline’s Gatwick handling operation and consolidated its three engineering sites in Wales into one base. During the year the airline consolidated the operation in to London Heathrow Terminal 5, briefly suspending operations from London Heathrow Terminal 3, London Gatwick and London City, and permanently retired its entire B747 fleet due to the reduced demand for travel. The Government’s Coronavirus Job Retention Scheme has helped the airline retain many jobs through the crisis. We received £258 million from the scheme in 2020 for which we are very grateful. Liquidity British Airways has had to act decisively to ensure it can remain competitive in a structurally changed industry. With an immense focus on liquidity, the airline has taken on a significant amount of new debt. Further opportunities to preserve the cash position have been implemented including management pay cuts, pilots unpaid leave, participation in the UK Government’s Job Retention Scheme, deferring a number of aircraft scheduled for delivery between 2020 and 2022 and robust financial controls to ensure only business critical spend was made. British Airways availed itself of a £298 million loan from the Bank of England Coronavirus Corporate Financing Facility (‘CCFF’), with the loan repayable in the first half of 2021. On 30 March 2020, the secured US dollar Revolving Credit Facility was extended for one year from 23 June 2020 to 23 June 2021. As at 31 December 2020 the available facility was $768 million. In November 2020, British Airways entered into an asset-financing structure, where a total of over $1 billion was raised to refinance short term funding and finance recent and future aircraft deliveries. In the same month, British Airways secured a three year Term Loan with its parent company, IAG, for an amount of €1.65 billion, which was fully drawn by year-end. On 22 February 2021, British Airways entered into a five year term-loan of £2 billion underwritten by a syndicate of banks, partially guaranteed by UK Export Finance. Keeping customers safe To protect our customers and crew, and build confidence in travel during these uncertain times, the airline introduced new COVID-19 safety measures including minimising contact, sanitising our aircraft from nose to tail and asking customers and crew to wear face masks unless they have a medical exemption. British Airways produced comprehensive video and text guides, published on its website ba.com, to help customers understand the changes to the travel experience. A new, contactless table service was introduced in the airline’s lounges to minimise movement, and aircraft boarding and disembarkation has been operated row-by-row. On board, changes were made to catering services to reduce contact between cabin crew and customers. Customers are provided with individual personal protection packs and cabin air is completely replaced every two to three minutes, passing through HEPA filters which remove microscopic bacteria and virus clusters with over a 99.9 per cent efficiency, equivalent to hospital operating theatre standards. In November 2020, respected industry body Skytrax awarded British Airways four stars for
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