Interim Management Statement

British Airways PLC
01 February 2008




INTERIM MANAGEMENT STATEMENT

Period April 1, 2007 - December 31, 2007 (Unaudited)

GOOD RESULTS DESPITE SOARING FUEL COSTS

British Airways today (February 1) presented its interim management statement
for the nine months ended December 31, 2007.


Period highlights:

  • Operating profit of £734 million (2006: £571 million) up 28.5 per cent
  • Operating margin 11.1 per cent (2006: 8.7 per cent)
  • Profit before tax of £788 million (2006: £584 million) up 34.9 per cent
  • Fuel costs up £72 million in third quarter
  • OpenSkies EU US airline launched
  • Terminal 5 - less than eight weeks to opening
  • New London City New York services to be launched


British Airways' chief executive Willie Walsh, said:

'This is another good set of results despite soaring fuel costs and difficulties
in the market. Revenue up some one per cent and a strong cost performance has
led to an operating profit up 28.5 per cent. While fuel costs in the first six
months were down £36 million, they have soared £72 million in the third quarter.

The opening of Terminal 5 is now less than two months away and the public trials
and previews for our Executive Club members have been very successful. When it
opens in March our passengers will be able to enjoy a calm and effortless
experience. The suite of lounges will be the largest and most luxurious in the
world and will allow our passengers to work or relax in comfort.

We have also launched our new airline OpenSkies as a result of the new
transatlantic air treaty. It will operate initially with one Boeing 757 non-stop
between Europe and New York and offer business, premium economy and economy
class. It will complement our business not compete with it.

We will also launch a new all business class niche service in 2009, linking the
two largest financial centres of the world with flights from London City to New
York on Airbus A318 aircraft. We are confident it will be a success as London
City airport is only a short distance from the heart of London's financial
district.'


Financial review

Revenue was up by 0.9 per cent. Excluding exchange, revenue was up 3.2 per cent.

Passenger revenue at £5.7 billion was up 1.7 per cent on capacity up 0.8 per
cent. Seat factor was down 0.6 points to 77 per cent.  Yields were up 1.5 per
cent mainly due to more premium passengers travelling, although the gains were
partially neutralised by exchange rates, mainly the US dollar.

Club World and First performed strongly, driving our overall 4.2 per cent
increase in premium traffic. Shorthaul premium traffic has weakened and
non-premium traffic on the North Atlantic remains soft.

Cargo performance is improving.  Strong volumes from the Americas, UK and Middle
East South Asia, resulted in a 1.6 per cent improvement in cargo tonne
kilometres (CTKs).  Revenue fell £20 million to £453 million primarily due to
exchange rate movements.

Our cost performance continues to be strong, helped by the weak US dollar.
Total costs were down £101 million with unit costs down 1.5 per cent. Employee
costs fell by 6.9 per cent to almost £1.6 billion because of reduced pensions
costs and lower severance costs. Fuel was up 2.4 per cent due to the higher oil
prices, only partially offset by hedging and the weak US dollar.  Aircraft lease
costs were down 16.4 per cent as a result of fewer aircraft on operating leases
and renegotiation of existing leases. Engineering costs were up 11 per cent
because of higher freighter costs, price rises in maintenance and higher
volumes. Handling charges, and other operating costs have risen by 3.4 per cent
because of the cost of dealing with baggage issues earlier this year.

The financial position of the company remains strong. In quarter three we raised
a 15 year $1.7 billion aircraft financing facility and other financing
facilities totalling $1.6 billion. Cash at the end of December was £1.7 billion,
£631 million lower than at March 2007 but within our target range.  Our net debt
was £1.4 billion, up £457 million since the year end.  Cash and net debt were
affected by payments into the New Airways Pension Scheme (NAPS) and to the US
Department of Justice (DoJ) for anti-competitive activity.

Capital expenditure at £519 million was higher than last year because we took
delivery of four new Airbus A321 aircraft and two new Airbus A320 aircraft. We
also continue to invest in the new Club World cabin and Terminal 5.

The tax rate for the nine months was 21 per cent. It benefited from a one-off
credit because of the reduction in the UK corporation tax from 30 per cent to 28
per cent, effective from April 1, 2008. Excluding the one-off credit, the tax
rate for the period would have been 30 per cent.


Business review

The airline continues to win awards including the World's Leading Airline at the
World Traveller Awards, first prize for the new Club World seat at the
International Design Awards in the US, Best Airline, Best Shorthaul, Best
Economy Class and Best Frequent Flyer Programme at the Business Traveller Awards
and Conde Naste Traveller magazine Best Leisure Shorthaul Airline.

Following the incident at Heathrow in January involving one of our Boeing 777s,
the aircraft has been written off by underwriters and the insurance claim agreed
in full. There will be no material effect in the results. The flight and cabin
crew and all staff involved were praised for their outstanding performance in
the incident.


Bringing Terminal 5 Alive

Our key business objectives focus on four themes, the first of which is Bringing
Terminal 5 Alive.  T5 will open on time and on budget. Trials of all the new
processes and equipment continue to ensure T5 will be a flagship for the UK.


Basics and Brilliance

Our second theme redefines our customer promise under the banner of BA Basics
and Brilliance - ensuring consistent high quality service 24 /7 and brilliance
where it counts. Punctuality and baggage performance remain a challenge at
Heathrow where facilities are old and overstretched. Heathrow was designed to
handle 45 million passengers but today looks after 67 million passengers per
year. Both these key areas will be improved significantly when we move to our
new home in T5 but, in the meantime, we remain focused on improving our current
performance.


In the air we have completed the new Club World fit of our fleet of 57 Boeing
747s.


Investing in Growth

Our longhaul fleet order is fundamental to our third theme of Investing in
Growth. We have now formally signed the contracts for 12 Airbus A380 aircraft
and 24 Boeing 787 aircraft and options for a further seven A380s and 18 B787s.
The order allows for replacement of older aircraft and sustainable, profitable
growth.  A key factor in our choice of these aircraft was their environmental
performance and they score highly on every measure. They are cleaner, quieter
and more fuel efficient.

We have ordered two Airbus A318 aircraft to operate our planned business only
services from London City airport to New York in 2009.

We are always looking for opportunities to increase our slot portfolio at
Heathrow and we have acquired seven daily slot pairs during the nine months. Our
share of slots at Heathrow is 41 per cent.

During 2007 we formed a consortium with TPG to explore a bid for Iberia. As a
consequence of the recent decision taken by Iberia's core shareholders to sell
their shares to Caja Madrid, the consortium withdrew its indication of interest
for the company. We have retained our 10 per cent stake in Iberia.

By March our franchise agreement in the UK with GB Airways will end but we will
be launching services on some of the routes previously served by GB Airways.
Our agreement with Loganair ends in October.  Although historically successful,
the franchise model has outlived its purpose in the UK. This decision does not
affect our overseas franchisees who continue to provide valuable feed traffic
and brand exposure in areas we cannot serve.


Achieving a Competitive Cost Base

Our final and most enduring theme in recent years has been achieving a
competitive cost base.  Improving cost efficiency and eliminating waste in our
business is key to delivering our target of a ten per cent operating margin,
which we are on track to achieve by March 2008.

The CAA published its draft final consultation on the BAA Quinquennial (Q5)
review of airport charges.  The final decision on the price cap will be before
the end of March with the new charges to be implemented on April 1, 2008.  The
CAA has proposed that, at Heathrow, there is a 15.6 per cent increase in year
one of Q5.  In the other four years of the charging period, the CAA proposes a
rise of inflation (RPI) + 7.5 per cent each year.

The CAA has said that the increases reflect the increased costs of security
operations, cost of recent capital projects and allowances for significant
additional expenditure. However, we believe investment should be in the
interests of the customer and the right controls should be in place to ensure
greatly improved levels of service, following the Competition Commission's
public interest finding against BAA's performance.

We are sure this could be achieved without the excessive price hike that the CAA
is proposing compared with the detailed recommendations from the Competition
Commission.


Corporate Responsibility

The Government launched its three-month consultation on a third runway and
mixed-mode for Heathrow in November last year. We are very strongly in favour of
increasing runway capacity at Heathrow which we believe would generate £7
billion a year in national economic benefits. Mixed mode would generate an
additional £2.5 billion a year.

By the time a third runway could open, aviation's carbon emissions will be
capped under the EU Emissions Trading Scheme (ETS). This means that any growth
in aviation emissions resulting from extra flights at Heathrow or any other
European airport must be matched by equivalent emissions reductions elsewhere.
So there will be no increase in overall emissions as a result of a third runway.

The EU Environment Council endorsed the Commission's plan to impose the ETS on
foreign airlines flying into and out of the EU from 2012. This means a one-year
delay to the start of the scheme and the loss of the opportunity to begin
emissions trading on an intra-EU basis only.

We are concerned that the revised approach may provoke significant international
opposition and so lead to further delays in implementation.  Nonetheless the
Council's agreement does preserve a number of the features of the Commission's
original proposal, and is a more balanced and reasonable position than that
recently adopted by the European Parliament.

We have taken climate change very seriously for a long time. More than a decade
ago we were the first airline to set a target for improving fuel efficiency and
we led the way in advocating carbon trading.

We have set a new target to improve our aircraft fuel efficiency by 25 per cent
by 2025 and we have relaunched our online passenger carbon offset scheme on
ba.com to make it simpler and easier to use. On waste minimisation we aim to
recycle half of our waste and phase out use of landfill by 2010.

In readiness for the move to Terminal 5, we have taken delivery of 38 new
airport buses, which comply with the latest Euro 5 exhaust emission standards.


Trading Outlook

Our revenue guidance for the full year continues at 3 to 3.5 per cent in spite
of weakness in shorthaul premium and some non-premium markets.

Longhaul premium traffic continues to be strong, supporting our decision to make
more premium capacity available. We have seen some fall in non-premium bookings
in the January booking period compared to last year.

Our fuel costs will continue to rise and are now expected to be up more than
£100 million on last year. This year's increase will be offset by reductions in
other operating costs but our ability to mitigate rising fuel costs next year
will be challenging.

We continue to focus our efforts on achieving a 10 per cent operating margin for
this financial year.


Note to Editors:

There will be a webcast of an analyst conference call and slide presentation at
2pm (GMT) available through our website www.bashares.com.



                                                                        Appendix


Financial Position and Performance for the nine months ended December 31, 2007

Continuing Operations (Unaudited)



                                                  Nine months ended December 31

                                                      2007                 2006                Change
                                                                       Restated

Revenue                            £m                6,622                6,560                  0.9%

Operating profit                   £m                  734                  571                 28.5%

Profit before tax                  £m                  788                  584                 34.9%

Loss from discontinued operations  £m                  (4)                 (81)                 95.1%

Profit after tax                   £m                  623                  509                 22.4%

EBITDAR                            £m                1,428                1,278                 11.7%

Net assets                         £m                3,147                2,490                 26.4%

Net debt                           £m                1,448                  866                 (582)

Cash & cash equivalents            £m                1,724                2,643               (34.8)%

Basic earnings per share           P                  53.3                 43.8                 21.7%

Cash (out)/in from operating       £m                 (12)                  608                 (620)
activities

Passenger revenue per RPK          P                  6.59                 6.49                 1.5%*


*Increase VLY includes 2.4% due price, 1.9% due mix, (2.8)% due exchange


Certain information included in these statements is forward-looking and involves
risks and uncertainties that could cause actual results to differ materially
from those expressed or implied by the forward looking statements.

Forward-looking statements include, without limitation, projections relating to
results of operations and financial conditions and the Company's plans and
objectives for future operations, including, without limitation, discussions of
the Company's Business Plan programs, expected future revenues, financing plans
and expected expenditures and divestments. All forward-looking statements in
this report are based upon information known to the Company on the date of this
report. The Company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future events
or otherwise.

It is not reasonably possible to itemize all of the many factors and specific
events that could cause the Company's forward looking statements to be incorrect
or that could otherwise have a material adverse effect on the future operations
or results of an airline operating in the global economy.





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