BA CEO pay rises, cost-cutting talks continue

* BA CEO paid 743,000 stg in 2008/09, up 6 percent

* Pay frozen for current year

* Talks with unions over cost cuts ongoing

By John Bowker

LONDON, June 10 (Reuters) - British Airways BAY.L Chief Executive Willie Walsh received an above-inflation 6 percent pay rise last year despite current attempts to drive through cost cuts at the loss-making airline.

The group's annual report for 2008/09, published on Wednesday, showed Walsh was paid 743,000 pounds for the year to end March, up from 701,000 the previous year.

Neither salary included a bonus. Walsh waived his extra pay-out for 2007/08 in recognition of the botched opening of Heathrow's Terminal 5 building, which saw hundreds of flights cancelled and baggage lost.

Finance Director Keith Williams, who did take a bonus in 2007/08, saw his overall pay cut last year to 446,000 pounds from 556,000 the previous year.

Both men have agreed to a pay freeze this year and will go through July unpaid as the company attempts to cut costs. Talks are being held with trade unions this week in a bid to address the downturn in the airline industry -- what Walsh has dubbed a "fight for survival".

Britain's pilots union BALPA told Reuters it had agreed that spending on pilots -- which includes pay and perks such as transport to the aircraft -- should be kept at the same levels in 2010 and 2011 as the current year.

"We are in the middle of negotiations, but that objective has been agreed," a spokesman said, adding that the package could include pay-cuts.

Average expenditure per BA pilot was 107,600 pounds in 2008, according to data compiled by airports regulator the CAA. This compares with 89,500 pounds at arch rival Virgin Atlantic [VA.UL].

BA is also talking to the Unite union about cost cuts related to cabin crew and baggage handlers, and an industry source said the negotiations were going less smoothly than with the pilots.

BA cabin crew get paid more than double Virgin Atlantic's flight attendants at just under 30,000 pounds a year.

BALPA declined to comment on Willie Walsh's pay packet, while Unite was not immediately available for comment. (Reporting by John Bowker; Editing by Jon Loades-Carter)