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Tuesday, 11 July, 2000, 16:55 GMT 17:55 UK
Business 'picks up' at BA

Ready for take off: BA may have turned the corner
British Airways has sought to reassure shareholders at its annual general meeting when it said that its first quarter results were expected to show that business had picked up.

But the company warned that high fuel costs and the strong pound were still hurting Europe's largest airline.

"In the last two quarters we have begun to see signs of business improvement, with increased demand in the business travel, leisure travel and cargo markets," Chairman Colin Marshall told the meeting.

Mr Marshall added: "The indications are that the trend is continuing with a beneficial effect on yields and load factors."

The airline's first quarter results are expected to be released next month.

New chief executive Rod Eddington added: "We are not going to underestimate the difficulties of cost, competitive pressures, the regulatory barriers to progress. But I firmly believe we have the strategies, the people and the will to succeed.

Former chief executive Bob Ayling left the company in March.

Angry shareholders

Mr Marshall faced angry questions from shareholders, who queried the size of Mr Ayling's payout when he left.

He received a lump sum payout of 1.98m lump sum pay off and a 260,000 a year pension.

"Many shareholders have expressed concern at the amount of compensation paid to Mr Ayling and at the amount of pension, which under his contract, he is now entitled to receive. I regard that concern as entirely legitimate," he said.

He added: "Pension contracts for those joining BA today are less generous than those available when Mr Ayling's contract was agreed."

Rising cost of oil

British Airways has been hit by increased competition on transatlantic routes.

These problems have been exacerbated by a fuel and oil bill of 804m last year, which helped push it into loss.

With fuel prices still high, this is expected to continue to erode revenues.

The airline is currently in talks over a possible merger with KLM Royal Dutch Airlines.

A merger of the two would create the world's third largest airline behind United Airlines and American Airlines.

Mr Marshall declined to say how a merger could effect jobs.

"You'll have to wait for us to determine if we are going to proceed with any amalgamation with KLM. We are not at that point yet, we are still gathering information and until we have all that and we have a decision....we don't know," he added.

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