The way we run our business - British Airways

1 To create a really high-performingbusiness we need to build aninspiring and rewarding workplacewhere talented people can work tothe best of their ability to meet ourcustomers needs and our widersocial way we run our business34/ British Airways2008/09 Annual Report and AccountsCorporate governanceFinancial statementsBritish Airways2008/09 Annual Report and Accounts / 35We are re-inventing the way we work atBritish Airways . We are creating a leanerorganisation with a distinctive, high-performing culture through our flagshipchange programme, Compete the next three years this programme,described in detail on page 28, will help us to achieve our vision of becoming theworld s leading global premium will affect the way we interact with each other, how we measure individualperformance and how we promote,develop and reward talent.

2 Coupled withour commitment to be a responsibleairline, it will also help us achieve ourambitious environmental targets, put ourrelationship with key suppliers on a newfooting and continue our tradition ofsupporting communities in useful andimaginative managementWhile Compete 2012 is a long-termchange programme, current marketconditions have made it imperative to move fast to create a leaner, more agile structure starting at the very top of our December 2008, a third of ourmanagers left the business under avoluntary severance scheme. At the sametime we redesigned the organisation topromote greater customer focus andbetter governance and restructuring effort has made us moreefficient. It has also helped us identify anddraw on new talent in the business , helpedby the fact that we are now encouragingmore people to move between functionsto gain wider experience and find newoutlets for their skills.

3 To support greaterOverviewOur businessThe way we run our businessThe workplaceCustomerSilla MaizeyEngineeringGarry CopelandFinance and performance Keith WilliamsPeople and organisational effectivenessTony McCarthySales and marketingAndrew CrawleyStrategy and business unitsRobert BoyleCommunicationsJulia SimpsonCustomerSilla MaizeyEngineeringGarry CopelandFlight operationsStephen RileyOperationsAndy LordInvestmentsRoger MaynardLegal and governmentand industry affairsMaria Da CunhaSafety and securityTim SteedsChief ExecutiveWillie WalshCustomer andOperations ExecutiveManagementBoardReporting to the Chief Executive36/ British Airways2008/09 Annual Report and AccountsThe way we run our businessThe workplace continuedmobility, we have clarified individual andcollective roles and responsibilities andnow publish accountabilities for all of ourtop managers on our developmentWe need great leaders to help us contendwith current trading conditions and achieveour long-term vision.

4 A leading globalpremium airline must be bold and highlyeffective in developing present andpotential is why we introduced our HighPerformance Leadership (HPL) systemduring the year. This is an integratedsystem, linking business strategy, objectivesetting, performance assessment,development and reward. Focused initiallyon the senior leaders, HPL has rigorousassessment mechanisms to identifytalented leaders and to provide them with the right tools and support tocontinue developing. We have also defined, communicated andbegun to measure individual performanceagainst three capabilities we think we need in our leaders, in addition tooperational excellence: Communicating a common vision; Agreeing accountabilities; and Motivating and inspiring each capability, specific behaviourshave been developed so that leadersunderstand exactly what is expected ofthem and we are supporting them with a range of development programmes,including executive coaching, networks,forums and external courses.

5 We are also using new techniques to measureperformance. These will allow us tomonitor individual progress and track ourown overall success at managing the other leadership initiatives we launched were: Behaviours for Success a leadershipdevelopment programme for the HPLcommunity, focusing on understandingand developing personal leadershipperformance; Leadership Matters a scheme toidentify and develop leaders who havepivotal roles in the Customer andOperations areas of our business ; and A Leadership Development Portfoliothat will be introduced this year with theaim of supporting current and potentialleaders at every level of the business ,including emerging leaders, those on afast track to senior positions and thosewith strategic roles at the very top of our management of our businessChange must start at the top and duringthe year we reorganised our topmanagement team, comprising ninedirectorate heads, led by the ChiefExecutive.

6 It is now split into two groups the Management Board and the Customerand Operations Management Board, which meetsweekly, is responsible for the vision andstrategic direction of the Customer and Operations Executiveis accountable for day-to-day customerservice, operational performance andensuring the highest standards of group also meets , director of safety and security anddirector of investments also report to theChief Executive. Change must start at the top and during the year we reorganised our top management team, comprising ninedirectorate heads, led by the Chief Executive. Corporate governanceFinancial statementsBritish Airways2008/09 Annual Report and Accounts / 37 OverviewOur businessOur restructuring effort has made us more efficient.

7 It has alsohelped us identify and draw on new talent in the business , helped by the fact that we are now encouraging more people to movebetween functions to gain wider experience and find new outletsfor their skills. To support greater mobility, we have clarifiedindividual and collective roles and responsibilities and now publishaccountabilities for all of our top managers on our British Airways2008/09 Annual Report and AccountsThe way we run our businessThe workplace continuedPeople and organisationaleffectivenessIn transforming the way we work , weremain focused on creating a diverse,challenging and rewarding workplacewhich people across the airline can feelproud to be a part of, despite ourexpectation that the number of peopleemployed will need to reduce as we seekto streamline our at March 31, 2009, we employed40,627 MPE.

8 Average attrition remains low at 7 percent, with the exception of managementgrades where a voluntary redundancyprogramme contributed to a significantincrease in attrition for this group. RewardWe operate two principal funded definedbenefit pension schemes in the UK, theAirways Pension Scheme (APS) and theNew Airways Pension Scheme (NAPS).Both are closed to new members. FromApril 1, 2003, new employees wereentitled to join the British AirwaysRetirement Plan (BARP).SmartPension arrangements, which allowour UK-based employees to make theirpension contributions in a more tax-efficient way, were introduced in early2008. Around 90 per cent of those eligibleare now benefiting from this 2005 our Employee Reward Plan(ERP) has allowed non-managementemployees to share in the success of thebusiness based on the achievement ofcorporate measures and targets.

9 However,due to our losses in the year, the schemedid not operate in 2008 we used local incentive plans tooffer rewards for improved performance,assessed against a range of operational,customer and financial measures. The first plan was introduced in Terminal 5 and has led to significant improvements inperformance, with targets being exceededfrequently. This approach is now beingconsidered in other areas to drivecontinuous improvement in ourperformance across the bonus schemes, using a mixof financial and non-financial performancemetrics, are designed to improve overallperformance and to reward individualeffort. Given the deterioration in tradingconditions during the year, no bonuses will be , we have replaced our grade-based reward scheme for managers with anew broad band system which links rewardsmore closely to individual performanceand capability.

10 Separately, our Bravorecognition scheme allows us to recognisepeople across our business for their effortsand are proud to be a business thatwelcomes and nurtures and inclusion are a way of life for diversity initiatives are all aboutdignity and respect. They are designed to promote good relationships betweencolleagues, irrespective of their background,religion or culture. As part of our annualdiversity week, a series of events was heldto raise awareness and promote a moreTotal membersMarch 31, 2009 APSNAPSBARPA ctive members1,49428,1306,770 Pensioners in payment19,26615,699 Dependent pensioners7,3012,756 Deferred pensioners3,14322,30758431,20468,8927,35 4 Given the deterioration intrading conditions duringthe year, no bonuses will be paid.