Walsh could earn up to #1.5m a year at British Airways

The former chief executive of Aer Lingus, Willie Walsh, could earn more than £1.5 million (€2.24 million) a year under two bonus schemes being introduced by his new employer, British Airways.

The bonuses, which will only be payable if British Airways meets certain performance targets, would boost Mr Walsh's take home pay to more than four times the €544,000 he earned in his final year with Aer Lingus.

Mr Walsh, who stepped down from Aer Lingus in February, joined British Airways as chief executive designate in May and will take over from the current chief executive, Rod Eddington, when he leaves in September.

British Airways's annual report for 2004/5, which was published this week, shows the firm will double the annual bonus available to executives for the coming year to 100 per cent of basic salary if certain targets are met.

Mr Walsh's basic salary as chief executive of British Airways is worth £600,000 per year, which means he would be entitled to a maximum bonus worth an extra £600,000 if he meets the targets.

This performance bonus would be payable half in cash and half in British Airways shares, according to the annual report.

Mr Walsh could also be in line for a new long-term incentive plan bonus worth up to 150 per cent of his basic salary. The bonus, which is worth a maximum of £900,000 after three years, would only be payable if targets based on shareholder returns and operating margins are met by the British airline.

A note to shareholders in the annual report said the proposed strategy for incentive pay was intended to increase the expected value to make the package more market competitive for executive directors. The proposed changes would result in the most senior executives having the highest proportion of pay at risk, with a greater emphasis on the longer term than other executives, it continued.

In a message to shareholders in the British Airways annual report, the firm's chairman, Martin Broughton, described Willie Walsh as the "youthful, respected, reforming, ex-Aer Lingus chief executive".

"He brings with him a reputation for strong leadership in difficult times - qualities that we will need to face the challenges ahead. I am confident he will build on the fundamental strategies in place that have delivered our current success."

Mr Walsh resigned from his position at Aer Lingus following a dispute with the Government over the future direction of the airline.