(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

        Securities registered or to be registered pursuant to Section 12(b) of the Act.

        Securities registered or to be registered pursuant to Section 12(g) of the Act: None

        Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

        Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

        Indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 [ ] Item 18 [X]

__________

* Omitted pursuant to General Instructions for Form 20-F.

** The Registrant has responded to Item 18 in lieu of responding to Item 17.

        Unless the context indicates otherwise, the "Company", "BA" or "British Airways" refers to British Airways Plc and "BA Group" or "Group" refers to British Airways, its subsidiaries and its quasi-subsidiary. "Airline" refers to British Airways Plc, British Airways CitiExpress Limited, dba (formerly Deutsche BA Luftfahrtgesellschaft Gmbh), and for historical comparatives Air Liberté. "Qantas" refers to Qantas Airways Limited.

        BA publishes its financial statements expressed in United Kingdom ("UK") pounds Sterling. In this document references to "US Dollars", "US $", or "$" are to United States ("US") Dollars, references to "pounds Sterling", "Sterling" and "pence" or "p" are to UK currency, references to "Japanese Yen" or "Yen" are to the currency of Japan, references to "Euro" are to the currency of the European Union and references to "A$" are to Australian Dollars. For the convenience of the reader, this document contains translations of certain pounds Sterling amounts to US Dollars at $1.579 to Sterling 1.00, the noon buying rate in New York City for cable transfers in pounds Sterling as certified for customs purposes by the Federal Reserve Bank of New York (the "Noon Buying Rate") on March 31, 2003. These translations should not be construed as representations that the pounds Sterling amounts actually represent such US Dollar amounts or could be converted into US Dollars at the rate indicated. The Noon Buying Rate on June 30, 2003 was $1.6529 to Sterling 1.00. For historical information regarding rates of exchange between US Dollars and pounds Sterling, see "Item 3 --- Key Information --- Exchange Rates". For a discussion of the Group's exposure to exchange rate fluctuations arising from its operations, see "Item 5 --- Operating and Financial Review and Prospects ---Other Matters --- Foreign Currency Exposure" and "Item 11 --- Quantitative and Qualitative Disclosures about Market Risk -- Foreign Currency Risk".

        Cash dividends, if any, paid by BA will be in pounds Sterling, and exchange rate fluctuations will affect the US Dollar amounts received by holders of American Depositary Shares ("ADSs") on conversion of such dividends. Moreover, fluctuations in the exchange rates between pounds Sterling and the US Dollar will affect the US Dollar equivalent of the pounds Sterling price of the ordinary shares of the Company (the "Ordinary Shares") on the London Stock Exchange, and, as a result, are likely to affect the market price of the ADSs traded on the New York Stock Exchange in the United States.

        The Company's fiscal year ends on March 31 of each year, and references herein to "fiscal year" or "fiscal" are to the year ended March 31 of the year specified.

        Certain information contained in this report, including, without limitation, in "Item 4 --- Information on the Company" and "Item 8 --- Financial Information --- Legal Proceedings" as well as certain statements made throughout "Item 5 --- Operating and Financial Review and Prospects" and "Item 11 --- Quantitative and Qualitative Disclosures about Market Risk" are forward-looking and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements included in this document and in documents incorporated herein by reference generally may be identified by the words "will", "expects", "plans", "anticipates", "intends", and similar expressions that indicate the statement addresses the future. 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 Future Size and Shape ("FSAS") program, cost reductions, aircraft financing, 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 at the time of such statement. 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 practicable 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. Some factors that could significantly affect expected capacity, load factors, yields, revenues, expenses, unit costs, capital expenditures, cash flows and margins include the airline pricing environment, customer demand, fuel and other commodity costs, capacity decisions of other carriers, cost of safety and security measures, actions of the UK and other governments, foreign currency exchange rate fluctuations, inflation, the economic environment of the airline industry, the general economic environment, the commencement or escalation of hostilities, terrorist activities, health scares, the ability to reach labor and wage agreements, industrial actions such as strikes, compensation levels in the industry, the status of the Company's relationships with the union groups, and other factors discussed herein, including under "Item 3 --- Key Information --- Risk Factors".

        Not applicable.

        The summarized financial information (expressed in pounds Sterling) set out below is derived from the audited consolidated financial statements of the Group presented elsewhere herein or otherwise included in BA's annual reports and which were audited by Ernst & Young LLP, independent auditors. The data should be read in conjunction with, and are qualified in their entirety by reference to, such Financial Statements and accompanying Notes included elsewhere in this report.

        The commercial airline industry is highly competitive and the market for air travel has experienced, and the Group expects will continue to experience, significant changes. In addition, the Group's future performance is subject to a variety of factors over which it has little or no control, including adverse governmental regulation, fluctuations in jet fuel prices, adverse changes in economic conditions, adverse changes in the demand for air travel, the availability of financing and fluctuations in currency and interest rates. There are likely to be other risks that the Group has not identified in this report that could have an adverse effect on the Group's business, revenues, operating profit, net assets and liquidity and capital resources.

        The markets in which the Group operates are highly competitive. The Group faces competition from other airlines on its routes, as well as from indirect flights, charter services and from other forms of transport. The Group's pricing decisions are affected by many factors, including competition from other airlines, some of which have cost structures that are lower than the Group's or have other competitive advantages and therefore may be able to operate at lower fare levels. Fare discounting by competitors has historically had a negative effect on the Group's financial results because the Group is generally required to respond to competitors' fares to maintain passenger traffic. There can be no assurance that the adverse effects of any future fare reduction or other competitive factors would be offset by increases in passenger traffic, reductions in costs or changes in the mix of traffic that improve yields.

        In the wake of the events of September 11, 2001, the subsequent war in Iraq and the Severe Acute Respiratory Syndrome ("SARS") outbreak and because of the resulting adverse operating environment and uncertainty, the Group raised additional funds to increase its liquidity. The Group has, at March 31, 2003 over Sterling 2 billion in cash and deposits and committed facilities. Although the Group believes that it would be able to return to the capital markets to raise additional funds, there can be no assurance that the airline industry, fleet and other assets will continue to be as attractive to lenders. In addition, the Group's ability to access one of its committed facilities of US$393 million is subject to the Group's Standard & Poor's corporate credit rating. However, the Group's corporate rating stands at BB+ (stable) which is well above the lowest level B-, at which the facility can be drawn. Once the facility is drawn there are no ratings covenants.

        The airline industry is capital intensive and the Company has significant debt and capital commitments. The Company's ability to finance its operations and capital needs, and the cost to the Company of financing, may be affected adversely by various factors including financial market conditions. For example, most of the Company's debt is asset-related, reflecting the attractiveness of aircraft as security to lenders and other financiers. However, there can be no assurance that aircraft will continue to provide attractive security for lenders. In addition, a significant portion of the Company's debts are subject to floating interest rates. To manage interest rate risks, the Company enters into swap and other hedging arrangements. Nonetheless, the Company could experience adverse effects from interest or currency rate volatility. In addition, the Company's financing activities are also subject to exchange risks as borrowings and related expenditures may not be denominated in the same currency. For discussion of the Company's outstanding debt obligations, capital commitments and other obligations as well as interest rate and foreign currency risk, see "Item 5 --- Operating and Financial Review and Prospects--- Other Matters --- Debt and other contractual obligations", "Item 5 --- Operating and Financial Review and Prospects--- Other Matters --- Foreign currency exposure" and "Item 11 --- Quantitative and Qualitative Disclosures about Market Risk."

         Jet fuel prices are a significant component of the Group's cost structure and have been and could be highly volatile. While the Group endeavors to hedge part of the jet fuel price volatility, due to the competitive nature of the airline industry and other factors, including the price-sensitivity of the demand for air travel, in the event of any increase in the price of jet fuel there can be no assurance that the Group's operations and financial performance would not be adversely affected.

        The Group's operations, including its ability to deliver customer service, are dependent on the effective operation of its equipment, including its aircraft, maintenance systems and reservation systems, and the commitment of its personnel. BA's operations are also dependent on the effective operation of the UK National Air Traffic Control Service (NATS), the British Airport Authority and other airport authorities worldwide, and the air traffic control infrastructure in the markets in which the Group operates. Equipment failures, personnel shortages, air traffic control problems, and other factors that could interrupt operations could adversely affect the Group's operating and financial results and its reputation.

        The events of September 11, 2001 had, and continue to have, an adverse effect on the Group's operating and financial results. During the week of the terrorist attacks, the closure of US airspace, which is an important market for the Company, resulted in a 60% fall in passenger traffic and a revenue loss of Sterling 48 million (which was partially offset by Sterling 22 million in compensation received from the UK government). Following these events, the Group experienced significant decreases in turnover, increases in security and other costs, higher ticket refunds, lower yield and load factors and higher insurance costs. The airline industry has not recovered from these shocks and suffered further setbacks with the Iraq war, in the spring of 2003, and the recent outbreak of SARS. The effects of the events of September 11, 2001, the threat or occurrence of other terrorist attacks or the commencement or escalation of hostilities (or the threat thereof) have had and could continue to have an adverse effect on the demand for air travel and the Group's operating and financial results

        A substantial portion of the Group's business is international. In addition to the effects of, among other factors, terrorism, hostilities and health scares, the Group's current international activities and prospects could be adversely affected by factors such as reversals or delays in the opening of foreign markets, exchange controls, currency and political risks, tax and changes in international government regulation of the Group's operations. For further discussion of the foreign currency risks the Group faces, see "Item 5 --- Operating and Financial Review and Prospects ---Other Matters --- Foreign Currency Exposure" and "Item 11 ---Quantitative and Qualitative Disclosures about Market Risk -- Foreign Currency Risk".

        Franchisees are subject to similar operational risks, terrorist and other threats and uncertainty in their operations internationally as described above. Any such events which have an adverse impact on one of the Company's franchisees could also have an adverse impact on the Company. The safety and security of franchise operations are reviewed as appropriate, though the Company can give no absolute assurance in this regard.

        The demand for air travel and, accordingly, the Group's operating and financial results may be affected by changes in local, regional, national and international economic conditions. Significant and prolonged downturns in economic conditions would be likely to have an adverse effect on the Group as shown by the deterioration in the Group's revenue during the current economic downturn. In addition, other demand-related factors such as health concerns, foot and mouth disease, perceptions of airline safety and adverse weather conditions could have an adverse effect on the operations and financial results of the Group. For example, the recent outbreak of SARS caused a decline in demand for certain of the Group's routes.

        The Group's operations are subject to a high degree of UK and foreign government regulation covering most aspects of the airlines' operations, including route flying rights, fare setting, operational standards (the most important relating to safety, security and aircraft noise), airport access and slot availability. Furthermore, British airlines are affected by more general UK and foreign governmental policies and their implementation, particularly in relation to competition and airports. Future operating and financial results may vary based upon the effects of such regulation, including the granting and timing of certain governmental approvals needed for new and existing alliances, codesharing agreements and other arrangements with other airlines, restrictions on competitive practices, and the costs of meeting customer service standards and aircraft noise restrictions.

        In response to the events of September 11, 2001, the UK government, under the European Union's program of exceptional support for airlines, granted the Group Sterling 22 million in compensation. In addition, the Group is not permitted to conduct many of its operations without insurance. If market conditions similar to those following September 11, 2001 recur, the Group might require further government assistance to avoid impairment or interruption of its operations. A failure to obtain such assistance could have a material adverse effect on the Group's operations and financial condition. In addition, other governments, including the US government, have and may continue to provide financial and other support for their domestic airlines that is more significant than the government support provided to the Group. State aid for the aviation industry, whilst not technically lawful in Europe, remains on the political agenda as does the differing nature of the insolvency laws of different countries. Disparate levels of government assistance between the Group and other airlines could place the Group at a competitive disadvantage and have an adverse effect on the Group's operating and financial results.

        The airline industry is labor intensive. The Group's operations could be adversely affected in the event that the Group were not to reach agreement with any labor union representing the Group's employees or by an agreement with a labor union representing the Group's employees that contains terms that would prevent the Group from competing effectively with other airlines. As in most labor intensive industries, strikes, work stoppages and other organized labor activities could also have significant adverse effects on operating and financial results.

        The Group operates two main defined benefit pension schemes in the United Kingdom, the Airways Pension Scheme and the New Airways Pension Scheme. Both are now closed to new members.

        Under current UK GAAP and applicable UK pension law, actuarial valuations of the schemes are required to be carried out every three years -- these determine the assumptions to be used in valuing the scheme assets and liabilities together with the contributions to be made and the expense to be recorded in the profit and loss account. The latest actuarial valuation has commenced and is due to be completed by Autumn 2003. Changes in the assumptions used, including discount rates and expected return on plan assets (which is dependent on the value and projected performance of the pension funds), could have a material effect on the Group's required funding for the schemes and the expense recorded in the profit and loss account.

        The Group's operations are covered by a wide range of environmental regulations at local, national and international levels. These regulations cover, among other things, emissions to the atmosphere, disposal of solid waste and aqueous effluents, aircraft noise and other activities incident to the Group's business. Future operations and financial results may vary as a result of such regulations. Compliance with these regulations is costly and new regulations could increase the Group's cost base and adversely affect its operating and financial results. In addition, failure to comply with these regulations could adversely affect the Group in a variety of ways, including adverse effects to the Group's reputation.

        Traditionally, the Group earns most of its operating profit between April and October each year as demand is higher during this period, whilst the majority of the Group's costs are incurred more evenly throughout the year. Accordingly, as a result of seasonality of demand, operating results have and are expected to vary significantly from period to period within the financial year. Various other factors can also cause operating results to vary significantly from period to period and year to year. These variations in results and other factors may cause the price of the Company's securities to fluctuate significantly.

        The Company's Articles of Association provide the board of directors of the Company the authority to limit the right of non-UK persons and the rights of non-European Economic Area (EEA) persons to hold or exercise votes in relation to Ordinary Shares of the Company (or ADSs in respect thereof) in circumstances where not limiting such holding or voting rights would adversely affect the Group's current or future operating rights. Non-EEA persons means persons or entities who are not nationals of a State in the EEA (comprising all the countries of the European Union and of the European Free Trade Area) ("non-EEAs").

        At the Company's 2002 Annual General Meeting, a new special voting share (the "Special Share") was introduced into the capital of the Company. This Special Share has no economic value and is held by a special purpose subsidiary of The Law Debenture Trust p.l.c.. The sole function of this arrangement is to protect further the Company's operating rights by ensuring that the votes cast by the UK shareholders of the Company, taken as a whole, represent a majority.

        Accordingly, non-UK and non-EEA persons who hold Ordinary Shares (or ADSs in respect thereof) are subject to the risk that their rights in respect of the Ordinary Shares may be limited. For more information, see "Item 10 --- Additional Information --- Memorandum and Articles of Association --- Limitations on Voting and Shareholding".

        British Airways is one of the world's leading scheduled international passenger airlines. Its main activity is the operation of international and domestic scheduled passenger airline services. The Group's principal place of business is London, one of the world's premier airport locations, which serves a large geographical area and a comparatively high proportion of high-yielding point-to-point business. London's Heathrow airport handles more international passengers than any other airport in the world. The Group also operates a worldwide air cargo business in conjunction with its scheduled passenger services. The Group currently operates one of the world's most extensive international scheduled airline route networks, comprising 156 destinations in 75 countries at March 31, 2003. In fiscal 2003, the Group carried more than 38 million passengers on its services.

        British Airways Plc was incorporated in 1983 with Registered Number 1777777. It is domiciled in England and has its registered offices at Waterside, PO Box 365, Harmondsworth UB7 0GB, England, Telephone: +44 (0) 870 850 9 850. It is a public limited company organized and operating under the laws of England and Wales. Its agent in the United States is Paul C. Jasinski, 75-80 Astoria Boulevard, Jackson Heights, NY 11370.

        In 2001, to mitigate the effects of the economic downturn prior to the events of September 11, 2001, the Group adopted a strategy of tight capacity management and cost control. After the events of September 11, 2001 as it became apparent that more drastic action was necessary, the Group undertook a comprehensive review of its cost structures, network operation, fleet complement and business strategies.

        In February 2002, the results of this review were announced as part of a major package of measures designed to return the Group to profitability. This program, known as Future Size and Shape ("FSAS"), signaled a significant change to the size of the Company and took further steps to restructure its cost base. Annualized cost savings of Sterling 650 million were targeted by March 2004, and more than Sterling 450 million of this amount was secured as expected by the end of March 2003.

        The major components of the FSAS program were cost reduction (particularly manpower), further restructuring of the European shorthaul business to provide a competitive response to the no-frills carriers, the endorsement and acceleration of the Group's existing fleet and network strategy unveiled in 1999 and the acceleration of the strategy to 'de-hub' operations at Gatwick. In addition, management were tasked with simplifying the business.

        The key element in delivering the program's cost targets was manpower reductions. It was expected that manpower reductions of approximately 5,800 would be made between February 2002 and March 2004, in addition to the 7,200 manpower reductions announced in September 2001. In total, this will amount to a 23% reduction in the targetted workforce as against August 2001. By March 2003, 10,182 manpower reductions had been achieved. The Company also announced that the remaining 3,000 manpower reductions were to be accelerated for achievement by September 2003, rather than the initial deadline of March 2004, as a response to the difficult trading environment caused by the war in Iraq, and the outbreak of SARS. The Company has endeavored to achieve the reductions by voluntary means and approximately Sterling 365 million of annualized cost savings had been achieved in this area by the end of fiscal 2003.

        In addition to manpower savings, cost reductions in the areas of distribution, information technology (IT) and procurement were also targeted. Savings of Sterling 100 million were to be made in both fiscal 2003 and fiscal 2004. By March 2003, the program of cuts was well under way with annualized savings of Sterling 205 million being delivered.

        Given the challenging trading environment that the airline industry currently faces, the focus on controlling costs remains a key priority. In addition to the measures discussed above, the Company announced further cost savings initiatives as part of its business planning process that aims to remove a further Sterling 450 million of annualized costs from the business by March 2005. These measures focus on reducing external spend and further simplification, in particular giving customers and staff more online access to systems and procedures.

        Capital expenditure was also the focus of stringent review with an upper limit of Sterling 450 million for fiscal 2003 being beaten. FSAS also set a disposal target of Sterling 900 million by March 2004, of which Sterling 611 million had been achieved by March 2003.

        The FSAS program outlined further significant changes to the shorthaul business. These included changes to the shorthaul pricing structure, offering passengers lower fares and greater flexibility, which were rolled out from May 2002 and are now substantially complete. As part of the drive to reduce global distribution costs, payments to travel agents in the United Kingdom for shorthaul bookings have been reduced, and British Airways' lowest available fares are available on its website. The website, www.ba.com, has undergone revolutionary change. Usage of the website has increased significantly with approximately 41% of shorthaul non-premium point-to-point bookings now made online.

        British Airways CitiExpress, the wholly owned regional subsidiary airline, operates regional domestic and European services from 21 airports across the British Isles. The airline carries approximately 4.5 million passengers a year on 90 routes with a fleet of 72 aircraft.

        In June, 2003 the sale of the Company's wholly owned subsidiary dba (formerly Deutsche BA) to Intro Verwaltungsgesellschaft mbH, the Nuremburg-based aviation consultancy and investment company was announced. The sale was completed on June 30, 2003. See "Item 4 -- Information on the Company -- Alliance Benefits -- dba (formerly Deutsche BA) ".

        The fleet and network strategy aims to match capacity more closely to demand, simplify the fleet and reduce exposure to unprofitable markets. Through increased aircraft utilization and network restructuring the UK-based fleet has steadily decreased. In fiscal 2003 the number of aircraft in service was reduced by 30 to 330.

        The Company's overhaul of its wide-bodied aircraft is complete. Currently the Group has no further orders for wide-bodied aircraft. In shorthaul, the Company continued to reduce its fleet of Boeing 757s in favor of Airbus aircraft. BA has confirmed future deliveries for three Airbus A319s, six A320s and ten A321s; three of the aircraft will be delivered in fiscal 2004.

        In April 2003, the Company announced the retirement of its fleet of seven Concorde aircraft with effect from the end of October 2003. The decision was made for commercial and operational reasons with passenger revenue falling steadily against a backdrop of rising maintenance costs for the aircraft.

        See "Item 4 - Information on the Company - Airline Fleet".

        In December 2000, a three-year plan to "de-hub" Gatwick was announced. This involved relocating services to some destinations to Heathrow where slot constraints and bi-lateral agreements permit, concentrating on serving the local point-to-point market at Gatwick and simplifying the structure and operations of activities at Gatwick. The operations of CityFlyer Express and British Airways (European Operations at Gatwick) were also integrated into the BA's other Gatwick operations. As part of the FSAS program, these changes have been accelerated.

        In total, as a result of the de-hubbing process, capacity at Gatwick is expected to have decreased by 60% between summer 1999 and summer 2003.

        Simplification of the business remains a key priority for the Company. Simplification runs across the business and underpins a number of the cost initiatives noted above. While much progress has been made to date -- fleet, IT, executive club, engineering inventory -- to give a few examples, more work needs to be done to make the business less complex for both our customers and our staff.

        British Airways CitiExpress was formed in March 2002 through the combination of two wholly owned subsidiaries, British Regional Airlines and Brymon Airways.

        BA subsequently merged the operations of two other wholly owned regional subsidiaries, BA Regional and Manx Airlines, with British Airways CitiExpress, thereby creating a single wholly owned regional subsidiary airline.

        British Airways CitiExpress, the wholly owned regional subsidiary airline, operates regional domestic and European services from 21 airports across the British Isles. The airline carries approximately 4.5 million passengers a year on 90 routes with a fleet of 72 aircraft.

        In June 1996, BA and American Airlines ("American") announced plans for a far-reaching commercial alliance. This alliance was subject to the regulatory approval of the United States and the United Kingdom, after consultation with the European Commission. Amid indications that the conditions being sought by regulators were not commercially viable, on July 30, 1999 the US Department of Transportation dismissed BA and American's application for approval for this alliance and the necessary antitrust immunity.

        BA and American subsequently filed for approval of a more limited codeshare arrangement which did not receive approval from the US Department of Transportation. In August 2001, BA and American filed for anti-trust immunity for an enhanced alliance involving extensive codesharing as well as benefit sharing on selected routes. The conditions imposed on BA and American by the US Department of Transportation in January 2002 were not commercially viable and the enhanced alliance was abandoned. In November 2002, BA and American concluded a codeshare agreement for points behind and beyond the US gateways and Heathrow, respectively. This agreement was filed with the US Department of Transportation and approved in a final order issued on May 30, 2003. Implementation is under way and codeshare services are expected to commence in autumn 2003.

 oneworld

        oneworld was launched in February 1999 and has grown to eight members: Aer Lingus, American Airlines, British Airways, Cathay Pacific, Finnair, Iberia, Lan Chile and Qantas. The benefits of oneworld include: greater rewards and recognition for frequent flyers (e.g. earning and redeeming miles on all airlines, access to all lounges in the member network), people from each of the airlines supporting the passengers of any of the member airlines, flexible round the world travel products and smoother transfers between carriers.

        oneworld's lead as the most international global airline alliance continues with oneworld member airlines serving over 130 countries and territories as at March 31, 2003.

        The BA/Qantas partnership is now entering its tenth year. Initial approval from the Australian Trade Practices Commission for operation of joint services on the "Kangaroo Routes" (routes between Europe and Australia) expired in May 2000. BA and Qantas received approval from the Australian Competition & Consumer Commission ("ACCC") to continue the agreement for a further three years until July 21, 2003 and to expand the route group over which the two carriers can co-operate to include the worldwide networks of both airlines. An application has been made to the ACCC to continue joint operations under the Joint Services Agreement beyond July 21, 2003. Interim approval has been received, which allows the parties to continue uninterrupted co-operation until the ACCC reaches a final determination (expected within the calendar year). Application will also be made to the UK Office of Fair Trading and the European Union competition authorities.

        The benefits associated with changes to Kangaroo Route operations through South-east Asia and a greater degree of hubbing over Singapore have helped trading on these routes in very difficult circumstances, including the war in Iraq and the outbreak of SARS. This improving trend was further helped by the co-location of BA and Qantas revenue management teams covering the Kangaroo Routes, with load factors significantly higher than in previous years.

        Following the acquisition of a 9% stake in Iberia in March, 2000, various commercial codeshare arrangements were put in place. Further routes were added on three separate occasions during fiscal 2003 and codesharing has been extended to include routes operated by British Airways franchise partner GB Airways. All routes between London and Spain operated by British Airways, GB Airways and Iberia (IB) now carry the BA and IB flight designator codes.

        In July 2002, British Airways, GB Airways and Iberia notified their co-operation agreement under European Union competition rules. The carriers now co-operate in many areas, including codeshare on parallel routes, joint selling and schedule co-ordination.

        During February 2003, codeshare arrangements were implemented with Cathay Pacific on services between Hong Kong and Seoul. Cathay Pacific has also placed its code on selected British Airways services between London and Copenhagen and Lisbon.

        dba, which was a wholly-owned subsidiary of BA, continued its focus on German domestic operations. dba now operates a fleet of 16 Boeing 737-300 aircraft. Following the restructuring of dba into a "no-frills" carrier, it no longer fits with the full service strategy of the Group.

        On March 17, 2003, it was confirmed that easyJet did not wish to take up their option to buy dba; during the period of the option BA received a total of Sterling 6.1 million in capital contributions and option payments from easyJet.

        In June 2003, the Group entered into a binding agreement to sell dba to Intro Verwaltungsesellschaft mbH, a German aviation consultancy and investment company. Intro agreed to buy the entire share capital of dba for Euro 1. As part of the transaction, the Group invested Sterling 25 million in dba and agreed to guarantee lease payments in respect of dba's fleet of 16 aircraft for one year, at a cost of Sterling 2 million per month. In exchange, the Group will receive 25 per cent of any dba profits, or 25 per cent of any profit on disposal of dba, to June 2006, up to a maximum of Sterling 300 million. The sale of dba was completed on June 30, 2003.

        As at March 31, 2003, the Group had a total of seven franchise partners providing feeder traffic onto the BA network of services. See "Marketing and Sales -- Franchising" below.

        British Airways entered into an alliance relationship with SN Brussels Airlines in July 2002. As part of the agreement, codesharing was introduced between London and Brussels in October 2002. Codesharing between the Group's wholly owned subsidiary British Airways CitiExpress and SN Brussels Airlines was also introduced, with extensive codesharing between UK regional points and Brussels. British Airways and SN Brussels Airlines also completed an exchange of airport slots at London's Heathrow airport.

        In July 2002, British Airways and SN Brussels Airlines notified their co-operation under European Union competition rules. The carriers' request to co-operate in many areas, including codeshare on parallel routes, joint selling and schedule co-ordination, was subsequently approved for a period of six years.

        BA's principal activities are the operation of international and domestic scheduled air services for the carriage of passengers and cargo. BA's main business is the provision of scheduled passenger services, which accounted for approximately 85% of Group turnover in the year ended March 31, 2003. The cargo operation is run independently of the passenger business, although cargo is generally carried in the holds of aircraft flying scheduled passenger services.

        The Group also provides other services to outside parties, such as aircraft maintenance. In addition, the Group's operations include certain ancillary airline activities. See "Ancillary Airline Activities" below.

        The following table details the Group's turnover by business activity:

        See "Item 5 --- Operating and Financial Review and Prospects --- Year By Year Analysis --- Year ended March 31, 2003 compared with year ended March 31, 2002 -- Geographical Analysis" and "Item 5 -- Operating and Financial Review and Prospects -- Year By Year Analysis -- Year ended March 31, 2002 compared with year ended March 31, 2001 -Geographical Analysis."

        BA's scheduled route network forms the basis of its business and is one of the world's most extensive. As of July 2003, BA (including subsidiary carrier British Airways CitiExpress) served some 156 destinations in 75 countries. Including codesharing and franchise arrangements, flights with BA codes served some 265 destinations in 101 countries. Adding the services of BA's alliance partners, the global network served some 563 destinations in 132 countries.

        During the 12 months ended May 2003, BA introduced services to Krakow, London City and Luanda and Group services with the BA brand were introduced to the Isle of Man, Liverpool and Luton as the subsidiary company Manx Airlines Ltd switched to operating under the BA brand. Services to Cardiff, Charlotte, Gothenburg, Leeds Bradford, London Stansted and Sheffield were discontinued.

        Details of the Group's fleet at March 31, 2003 are set out below: