Willie Walsh, the chief executive of British Airways, will receive an inflation-busting 6 per cent pay rise, taking his salary to £743,000 this year, and could gain £1.1 million in deferred share bonuses.

The pay award was published in the airline’s annual report yesterday, but the timing is embarrassing as Mr Walsh is negotiating pay cuts with his employees. He said last night that he would forgo his annual bonus of up to £550,000 in shares this year.

Mr Walsh waived his cash bonus of £700,000 last year after the botched opening of Heathrow’s Terminal 5 and has said that he will work for free during July.

BA lost £401 million last year and Mr Walsh has called for significant cost-cutting as the airline faces its “worst ever trading environment”. The carrier has already reduced its headcount by 2,500 and is seeking the equivalent of a further 2,000 job loses. The company is also negotiating to cut bonuses and allowances that its 14,000 cabin crew have accumulated over many years of pay settlements.

The Times has learnt that BA cabin crew can earn up to £1,000 a trip in meal and travel allowances on top of their basic salary. The figures, which are for 2008, were given to The Times by a former cabin crew member. These additional payments mean that BA’s cabin crew have average pay of £29,900, which is more than twice the £14,400 paid to Virgin Atlantic crew.

Unions have said they are willing to make temporary changes to terms and conditions but not permanent cuts.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive