British Airways (LON:BAY) is to tackle its pensions deficit by maintaining annual contributions at the current level of £330m, plus agreed annual increases in line with inflation expectations averaging three per cent. TheaAirline has agreed with trustees that the contributions continue until 2026 for New Airways Pension Scheme (NAPS) and 2023 for Airways Pension Scheme (APS). Additional deficit contributions will be made if its year-end cash balance exceeds £1.8bn. The schemes will also be provided with £250m of additional security over the company's assets which would become payable in the event of British Airways' insolvency.
British Airways chief financial officer, Keith Williams, says: "This agreement is a significant and positive step forward for British Airways and the pension scheme members. The trustees understand that the airline is unable to increase its contributions in the current financial climate but we have agreed a recovery plan that avoids closing the pension schemes, gives NAPS members choice over their future pension accruals, and increases the prudence of the assumptions employed in managing the scheme. The Pensions Regulator's initial response to the overall package has been positive and we look forward to receiving their confirmation that they have no objections once they have time to analyse the plan fully."
The merger agreement between British Airways and Iberia enables Iberia to terminate the agreement if the pension recovery plan is not, in Iberia's reasonable opinion, satisfactory because it would be materially detrimental to the economic premises of the proposed merger. All contributions into the British Airways' pension funds will continue to be funded by British Airways and will not be funded by Iberia or the merged holding company International Airlines Group. Iberia has three months to reach a decision on the pension recovery plan.
Elsewhere, it is understood that British Airways cabin crew members are to be balloted for a third round of strike action next week by Unite, the union representing 11,000 BA staff. In its traffic and capacity statistics for May, BA noted that the last 14 days of the month had been affected by industrial activity, however traffic, measured in Revenue Passenger Kilometres, fell by only 11.5%. Passenger capacity, measured in Available Seat Kilometres, was down 4.7% on May 2009; with the strikes accounting for some 6% reduction in capacity. BA added that the financial impact of the strike continues at some £7m per day.
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